What’s “iDeCo?” Who can join? Can foreigners join as well?

1. What’s “iDeCo?”
2. Deduction (bonus point)
3. Who can join?
4. How much users can contribute funding to iDeCo?
5. Where can users join?
6. Attention

(Updated on 2021/01/18)

Hi there Kinkajyuu here.

Have you heard of “iDeCo?” I believe some people feel “risky” or “not sure.”

I’d had no information about the word before I started. However, I’d been researching about it, opened an investing account on Rakuten investment bank and turn over there.

I’d like to share about what I searched about iDeCo today 1. What’s “iDeCo?” 2. Deduction (bonus point) 3. Who can join? 4. How much users can contribute funding to it? 5. Where can users join? Finally, I’ll tell you “Caution” about the iDeCo.

1. What’s “iDeCo?”

“iDeCo” is a Japanese personal contributory principle plan. Official name is “The individual-type defined contribution pension plan (iDeCo).” “Contributory principle plan” is pension plan that users can contribute funding to it personally. Users can come up with the money for investment. I think you know national pension and employee pension as ordinary pensions. But iDeCo is a personal investing pension, users can come up with the money for investment or fixed-term deposit.

Speaking of ordinary pensions, it is said there is a problem that you need to save 20,000,000 yen privately until getting your retirement. Some people breathe as if people cannot wouldn’t survive if they didn’t store enough money. The problem occurred from an official paper submitted by Health, Labour and Welfare Ministry in Japan. Plus, the figure calculation, 20,000,000 yen, is based on an ideal rich case. The ideal rich case means a couple, a husband has stable permanent job in a large company until his retirement and his wife can live on his salary.

Some people widely rumor a story which you won’t be able to receive your ordinary pension in the future. If you would like to live your retirement days in Japan, the future for our generation will not be a watertight plan. Whereat Japanese government announced to use the iDeCo system and save your money by yourself.  Official doesn’t tell you so directly, however, it is truth.

On the iDeCo system, users don’t need to invest the money by themselves, can deposit the money to fixed-term deposits or organizations called “funds.” Funds are organizations to invest money instead of users. Funds users can choice into iDeCo accounts are selected by Japanese government have all better transparency, and are safer than ordinary funds.

2. Deduction (bonus point)

The money which you chip in money for iDeCo is excluded, fully deductible, from income tax of year-end adjustment if you do. In fact, the users can implement income tax cut.

In case, the total amount of the tax saving until retiring will be 1,242,000 yen if you calculate as “age= 30, salary= 3,000,000 yen monthly investment money= 23,000 yen.” The amount of money will go to the user’s bank accounts instead of spending as income tax.

3. Who can join?

Users must be below age 60(it’ll be 65 soon), participate in national annuity and be in Japan as 4-A, B or C

4. How much users can contribute funding to it?

It depends on their status of working that how much users can put money in the accounts. Let’s take a look.

A: first insured person (e.g., self-employed worker)

Up to 68,000 yen per month

B: second insured person (e.g., company employee or government employee)

Up to 12,000 – 23,000 yen per month
*need to get permissions from their company

            1: employee whose companies don’t have company pension
                                           Up to 23,000 yen

            2: employee whose company have DC
                                           Up to 20,000 yen

            3: employee whose company have DC or DB or both
                                           Up to 12,000 yen

           4: government employee
                                           Up to 12,000 yen

C: third insured person (e.g., housewives or househusbands)

Up to 23,000 yen

5. Where can users join?

iDeCo official website (iDeCo公式サイト):
https://www.ideco-koushiki.jp/

iDeCo English top:
https://www.ideco-koushiki.jp/english/

運用管理機関一覧:
https://www.ideco-koushiki.jp/operations/

You can find out which banks are available for iDeCo on the page, “運用管理機関一覧”. The page is written in Japanese but it’s useful when you check if your bank has iDeCo plan.

Basically, I recommend you to have the iDeCo account on an internet investment bank. You can open the account on the internet or via mail, don’t need to go out to do and it means no health risk in this COVID-19 situation.

Especially, having the account on Rakuten investment bank or SBI investment bank is the best choice among the internet investment banks. They have no extra fee and no charge for opening the account. Surprisingly, some major city banks require to pay the kind of fee regarding no meaning with no explanation. Rakuten and SBI have wide range of funds choice because they can offer all investment funds in Japan. (funds for iDeCo is a little limited because of the government rules) Finally, they offer funds whose maintenance fee are totally cheap.

6. Caution

Risk

          It depends on which funds you’ll select but it is a part of investment. Funds’ items are risky and you have to be sure it’s possible to become your assets less.

Lock out money

          Basically, iDeCo is a way of money lock out. You cannot withdraw the money put in until 65 (depends on the rules change). It’s better to think if it’s possible to live on the money left.

Change time is once in a year

          You can change how much you put in to the iDeCo account monthly once a year. You can change it November on the last year if you want to change.

At the end, I opened the iDeCo account on Rakuten investment bank besides SBI investment bank because of my total use. I’ve already had the Rakuten credit card and the Rakuten bank account so it was easy to open investment bank account on Rakuten investment bank. Also, Rakuten users can use SPU program (Super Point Up program), it is a program you’ll get point back if you use Rakuten services as many as users can.

I want to highlight one thing that is differences of enable funds between Rakuten and SBI. They have different funds on iDeCo program. It’s better to look into available funds if you have favorite funds to choose.

Cheers,
Kinkajyuu