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Hi Blog. Here’s something interesting for those of you working in Japan and intending to stay on until retirement. Those of you who have done the research (see also our HANDBOOK FOR NEWCOMERS, MIGRANTS, AND IMMIGRANTS TO JAPAN) will know that (aside from a quickie lump-sum you can withdraw if you’ve only paid in for a few years and are leaving Japan) you have to pay into Japan’s mandatory pension system for 300 months (i.e., 25 years) or you don’t get anything back. Further, you can’t collect it until the mandatory retirement age, which was 60, but now has been raised to 61 and soon will be raised to 65, according to the Japan Times. So that means that even if you want to stop work early even after paying in for 300 months, you simply cannot collect. This is also assuming that, given the decreasing population and increasing pensioners, Japan’s pension system will even be solvent by the time you reach retirement age. Something to think about. Other issues of import raised in the Japan Times article link as well. Arudou Debito
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Mandatory retirement takes a leap forward
BY MARK SCHREIBER
The Japan Times, March 24, 2013
http://www.japantimes.co.jp/news/2013/03/24/national/mandatory-retirement-takes-a-leap-forward/
[excerpt] …Americans saw nothing odd about staying on the job until reaching age 65.
Now finally, Japan is catching up. From next month, when the 2013 fiscal year begins, the revised Law Concerning Stabilization of Employment of Older Persons takes effect, and the mandatory retirement age, defined as the minimum age for payout of social security pensions — last raised from 55 to 60 years in 1998 — will go up to 61, and then increase incrementally at the rate of one year of age every three years, until 2025, when the mandatory retirement age reaches 65.
Over the long term, the new statute is expected to have profound effects on hiring, the wage structure and many other aspects affecting the nation’s corporate culture.
Yet Japan, with its declining birthrate and aging population, clearly had to do something to maintain the size of its labor force (which was 62.98 million as of 2010). Mass immigration, one of its few other options, has been proposed numerous times over the years, but for reasons too numerous to raise here keeps getting put on the back burner.
Rest of the article at http://www.japantimes.co.jp/news/2013/03/24/national/mandatory-retirement-takes-a-leap-forward/
ENDS
16 comments on “JT: Japan’s minimum retirement age to increase to 65 by 2025”
The part about 300 months is obviously wrong, because if you can totalize your benefit with contributions in your home country, you only need 300 totalized months. For example, I can collect from Japan with just five plus years in Japan. I have the other twenty years from other covered work, in America.
— If you happen to come from a country with a totalization agreement with Japan. That obviously leaves out, say, Nikkei Brazilians…
You may have missed this bit of news, too:
http://hoofin.wordpress.com/2013/03/05/japanese-pension-eligibility-to-go-to-10-years-from-25-depending-on-consumption-tax/
The proposal is to go to 10 years (120 months) for vesting. This would obviously make it a lot easier for a participant to get something, (but could mess Americans up on something called “Windfall Elimination”.)
A good move. The government have finally woken up to the reality that things can’t go on as before, without destroying the pension system. Now, if they could only come up with a sensible, fair and welcoming immigration policy,we might all be able to relax and look forward to an adequately-funded happy retirement.
But that might be asking a little too much while the LDP hold sway….
@hoofin
be careful; I talked with somebody from the consular section before on this and they gave me a confusing answer. It was so confusing I cant explain it, but it wasnt so clear as you put it. It depends on the social security administrations interpretation of things. I think you need a min of eight or ten years work experience in the U.S. before your elligible for social security, but on the Japan side is where I couldnt get a clear answer. The person answering my question was Japanese I believe, perhaps that had something to do with it.
@#3 — If you’re loooking forward to an adequately-funded, happy retirement on a state pension anywhere, I think you’re going to be sorely disappointed. Make sure you invest privately.
Debito says;
‘This is also assuming that, given the decreasing population and increasing pensioners, Japan’s pension system will even be solvent by the time you reach retirement age.’
I think to be honest, that this is the most important part of the whole piece.
IMHO the pension system will collapse fairly soon. Even if Abenomics is a thundering success, the only way to make pension payouts without the massive structural changes Japan keeps putting off (immigration etc), massive inflation would be required, and that will devalue payments significantly; better to invest in something else for retirement.
This is a move designed to more suckers to hand over their hard-earned cash now in the (false) belief that they will benefit in the future. Again, cynic mode ‘on’, but you don’t get something for nothing in life, since when was the J-gov in the business of doing people favors?
If in doubt, just standby and watch what happens due to Abenomics in the next 6 months before you make a decision to join or not. After all the ‘irrational exuberance’ over increased stock-values, and corporate profits have worn off, let’s see if there are any pay rises, lay-offs, and the much promised increase in inflation pre-empting consumer spending, before we decide whether to trust the J-gov to invest for our retirement on our behalf, shall we?
All the talk of number of payments to get benefits, and payouts, is at this point, rather like discussing what cocktail to order next, and making a request to the band, on the Titanic.
My understanding is that the 10 year qualification period for a pension has been approved by the diet. When it will be implemented, I don’t know. This issue affects a lot of Japanese, too, and this change was aimed at helping Japanese qualify. However, informally, I’ve been told by the local pension office that it applies to anyone who has paid the required number of years, Japanese or non-Japanese. If so, it will right a big injustice.
@Todd (4):
My talking on this comes directly from the U.S.-Japan Totalization Agreement, effective October 1, 2005. Currently, it takes 300 months to vest in the Japanese system. The totalization agreement allows “credits” earned under U.S. social security to be counted towards the 300 months. Credits, if you might not know, used to be called “quarters” in the U.S. program. You earn 4 credits for each year of at least $4,680 or so of “covered earnings”. 4 credits = 4 quarters.
So it takes 40 credits to vest in the U.S. system—about 10 years. It takes longer to vest in the Japanese, but the assumption is you are in either one or the other. If the Japanese don’t recognize, for some reason, participation in U.S. social security, it’s breach of the totalization agreement.
It’s simply a matter of addition summing to 25. Anyone with the social security part just needs the difference in the nenkin system.
To the commenters talking about whether public pension programs “will even BE around!!!!” in the future, I counter with this: what makes you think private plans, like IRAs or 401(k)s are any more solid than a promise by a government? In fact, what’s more likely to vanish in some economic crisis is the IRA or private pension. They aren’t backed by a taxing authority. The taxing authority can always go tax private property/income to fund the public pension. That’s what goes on now anyway, they’d just do more.
If the concern is whether the benefit is “fixed”, same response: there is no guarantee that a private scheme is going to yield a fixed annuity for life. No doubt will various formulas be tweaked. But, if you are not in the program at all, the payout is definitely zero. Rather than 98% of what you thought you might get, or something like that.
My biggest concern is that Americans do what is expected of themselves and enroll Japanese into social security here as a matter of course. Japanese, however, play games with which program (National Pension (kokumin nenkin) or Employees’ Pension (kosei nenkin)) the American is eligible for. This is ongoing, it’s been since before 2005 and regrettably after, and it needs to be a more prominent issue in Washington. It isn’t yet.
So when I go back to the US to work, how will this affect me?
I have worked in Japan for about 12 years.
Another catch with the Japanese pension system is that if you have gaps, I think they deduct that latter. I havent paid into it for sometime as I havent had a F/T job, but I did pay into it for many years before. Ill get back with you on the U.S./Japan totalization agreement. I also have a copy of it. I thought it was a clear cut solution: you do the total required time and get the pension, depending on where you reside, but according to the person from the consulate section, it wasnt that clear. Their answer was very confusing, basically it was a non answer- wouldnt say yes or no.
@ Brooks (#9)
It means that you would automatically have vesting in US social security, if you never paid in here.
Once you have 13 years in US social security (again, assuming no prior participation), you would vest in the Japanese pension for which you have 12.
Those are the current rules, applying the totalization agreement.
@ Todd # 10:
It may be that the person in the pension section wasn’t up on every detail of the totalization agreement. Clearly, if someone paid for a few months in Japan, then stopped for a while, then picked it up again, the gap months wouldn’t count towards the 25 years. The totalization agreement is very clear, that one month for the Japan system is one month’s contribution, and each credit in the American system is the equivalent of three months in Japan.
What is the windfall elimination?
The consulate section should send out information to all US citzens, or provide a website link explaining in detail the totalization agreement. This is an important issue that has many confused.
For those of you who are seriously thinking of staying long enough in Japan to retire here, please read this cautionary and very well-thought out article. Not for the faint of heart.
http://www.wfs.org/blogs/michael-lee/japan-heading-for-zombie-future
“The nation appears to be suffering from a strange, unprecedented sociological malaise which is destroying the family structure and its critical child-bearing role, a loss of national vitality characterised by declining belief in marriage, decreasing fertility rates of females, shrinking families and the spread of isolation and fatalism.”
“Japan could be the first country in the world to die from introspection.”
@Becky,
as I said in another post, Japans insular uniqueness has becomes its worst enemy and the author of the article you link to is right; the Japan that you and I know will disappear if Japan doesnt snap out of the apathetic weirdness it calls “uniquely Japan”. I think Abe and the right wing parliment are working overtime to reverse this forecasted doom, but with all the wrong, twisted approaches.They blame the malaise on have been a colony of America for so long, and in their minds have a better solution- to remilitarize and conquer/defend themselves. The problem I beleive with that is its too late, they are boxed in by many former enemies who have caught up to them. As far as being conquered by another country, I dont think Japanese will go down that easy. They will develop their own nuclear defense, or strengthen the US/Japan security agreement, out of desperation, not because they actually want it. Japan had the chance to become a progressive democracy, but choose to turn inward, shut out the world and stay “Japanese” What I think we are going to see is a revival of right wing nationalism, of prewar nostalgia and glory to snap Japanese out of the mess its got itself into.