I recently crossed an arbitrary financial line in my accounts and wanted to share where I'm current at along the long journey to early retirement. I think I am just across the line to financially independent at this point, but a few years away from ER.
Basic Stats
- Demographic: Early 40s (M) SINK
- Visa: US citizen, Japanese PR via spouse
- Employment: æ£ç¤¾å“¡, SWE, Non-FAANG
Financials
- Assets: $2M / 3.2億円 invested into broad-based US/global low-fee ETFs
- The majority of it (~2/3) is a normal post-tax account so there are not any difficulties between US-Japan tax rules, having to access a 401K plan early, liquidity, etc.
- About 5% of it is in bonds, I intend to rebalance towards a TDF-type glidepath later in life
- Debts: None
- Income: tax line 給与 (令和5年): 2507万円
- Pension: accrued US/JP of 410万円 / annually at age 65
- Household Expenses: ~75万円 / month
The Near Future
I think it's time for me to coast. I now make more money from average market returns than from my employment. I've stopped pumping every spare yen back into investments, and am only going to contribute money to my accounts via employer-matched 401K. I have also increased the household budget (to above) to enjoy life more now in our 40s.
Using this as my model, working another 3 years I see myself at $2.8M/4.4億円 and working another 5 years at $3.5M/5.6億円. If I were to stop working immediately, a 4% rule withdrawal rate would give me 105万円 / month, which is a little bit tight, considering taxes, needing to switch to self-paid NHI/nenkin, etc. However in 5 years, that same rule will give me 185万円 / month, which is plentiful; 148万円 / month is the model at 3 years.
I interested in reducing my employment from full-time to 3 days a week around the 3 year mark. I may be interested in completely retiring / switching to some other kind of work in 5 years but that's too far out to say.
Risks
The market goes down -> I will undo my decision to stop buying more in my post-tax accounts, and continue working and investing my free cashflow until the markets have recovered.
The yen gets really strong -> This can't be hedged by buying S&P500, but dollar weakness will be partially hedged by my holdings of Total World. I can also extend my working career to buy cheaper dollar-denominated assets in yen.
Something weird happens in housing markets -> Potentially this would be one even that would require us to move out of central Tokyo, but I don't see the markets structurally changing in the near term, and we have quite of powder in our keg for either buying or renting.
The markets go sideways and 4% doesn't work but you've already retired -> Somewhat controllable via the knobs "go back to full time work", "go back to work", and "reduce expenses." This is probably the biggest risk that everyone will face in their fiRE journey, but there's not much more than can be said about it aside from pulling/pushing on one of the two sides of income/expense.
Sentenced to Jail / Settlement for a Criminal / Civil violation -> I carry the normal personal liability insurance that comes with so-called bicycle insurance, and it covers a number of personal liability issues for me and my wife. Aside from that, I will try to live life carefully and free from crime.
Too much cash -> I still haven't balanced the budget by spending more, so I am ending up with more cash in my Japan accounts than usual, but I'm comfortable putting some of them into USD term deposits, and sitting on the rest. If I end up with more money, it is not the end of the world.
The stock market continues to rip / I receive an inheritance -> see previous sentence
Gratitude
There is a lot of non-replicable luck involved in my financial growth, that save for the grace of God, could have gone the other way, including:
- Was born in the US
- Attended a top high school and university
- Choose to study CS when graduates could get easily hired
- Above-average career progression and compensation
- Easy pathway to immigrate to Japan
- Spouse shares my financial mindset
Questions
TLDR: I think I have enough saved to coast through the next 3-5 years before I could comfortably retire.
- Is there anything financially I am doing that you think I should stop doing?
- Is there anything financially I am not doing that you think I should start doing?
- I have considered that NISA potentially shelters ~5% of future capital gains tax, but starting from a zero-basis in my 40s, it would only potentially be significant in my late 50s/60s+, and my models indicate that this amount of tax savings is probably negligible to my enjoyment of life. I am ok with paying more in taxes to Japan either when I withdraw funds or die.
- I have considered naturalization, and continue to consider it, but at present, compliance with the US tax regime is a hassle not a deal-breaker.
- My spouse is happy and I don't feel it's necessary to compel them into the labor market. They are included on the expenses side of this post.
Retrospective of Existing FI/RE Posts
General Discussions:
- How much is enough? Widely varying estimates from $300K to 10億円
- Has anyone achieved fire? Yes, and many are close.
- How to FIRE in Japan? Figure out what your life goals are when you retire
Japan-specific:
- What does a maxed-out NISA look like? ¥200,000 / month
- What should I do before I FIRE? Get credit / debt
- Has anyone tried to evangelize their friends? 😇😈
Specific situations:
- Leanfire with $1.5M in early 30s
- Coastfire with a savings:spending gap
- 0.5億円 will last some amount of time
- 1億円 is not enough for Chiba
- 3億円 on the way to FIRE in Tokyo
- 4億円 but confused
- 5億円 and deleted (archive)
Update 1 – 2024-07-20 – Takeaways
Thank everyone who commented very much! I think there are a few takeaways that I can do more research on to help myself out:
- Consider opening Japan-based tax-sheltered accounts to arbitrage the Trump tax cuts on capital gains
- iDeco – I am offput by the lack of clarity regarding taxation
- NISA – this would require me to invest in individual stocks
- Research and model into my spreadsheet various costs when not-employed:
- What will NHI cost?
- What will I need to replace current employer-offered insurances?
- What will pension cost?
- Take advantage of opportunities
- Switch to a full-remote / part time job instead of retiring
- Switch from renting to home ownership (mortgage) before retiring
- Consider also applying for any credit before retiring (ie ANA or JAL SFC)
- Consider continuing to invest spare yen, as I am still saving more yen than I spend
- Hedge some counterparty risks on the US side
- Open a credit union and Schwab account in case my current providers want to drop me
- Open an IBJS account
- Minimally fund them both
by smol_computer_gaijin