Retirement is often seen as a time of freedom and relaxation, but achieving enough financial stability to support yourself while not working full-time requires careful planning, saving and investing. This is particularly true for foreign residents living in countries such as Japan. Relying on the Japanese pension system isn’t an option if you want full financial security. Not only is the system in decline, but what if you decide not to stay in Japan forever? A better solution may be one of the flexible international pension plans available for Japan residents.
Why is Japan’s Pension System in Trouble?
Japan’s population is declining, with the percentage of older citizens steadily rising. This is putting a
strain on the country’s pension system. With fewer workers contributing to the system, there are not enough funds to support the increasing number of retirees. Japan’s pension fund is facing a shortfall, and the government is raising the retirement age and reducing benefits to address the issue.
Although Japan may be an extreme case, the failing national pension system is not unique to this country. Many government pension plans around the world are in decline. This is why so many countries have established tax-advantaged retirement savings accounts and why international pension plans are becoming more popular. If you want to retire wealthy, or even just financially secure, you need to be proactive in establishing a retirement plan.
Why Do Foreign Residents in Japan Need a Traditional Pension Plan Alternative?
Japan’s failing pension system is a problem for all of the country’s residents, but it is even more troublesome for foreign people. Relying on the pension system of your home country isn’t much better. Traditional pension plans simply have too many limitations, such as:
- –Lack of flexibility: Government pension plans don’t allow you to choose how your money is invested or when you can access your funds.
- –Risk of currency fluctuations: Government pension plans will always be paid in the local currency, which can be risky for foreign residents who may have to convert their pension income back to their home currency. This can be especially problematic if the local currency is experiencing significant fluctuations or sustained weakness.
- –Limited investment options: Government pension plans may only offer a limited range of investment options, if they even offer any at all, which can limit your potential returns.
- –Lack of portability: Government pension plans are usually tied to the country where you are resident. This may mean that the pension can’t move with you if you decide to relocate to another country, or the pension income may even be taxable in your new country of residence, destroying any tax benefits that you may have had back home.
What Are the Benefits of an International Pension Plan for Foreign Residents in Japan?
An international pension plan offers several benefits. Not only is it more flexible than a traditional pension plan, but it can give you greater rewards as well. Here are some of the many ways an international pension plan can improve your life:
- -Tax deferral: An international pension plan allows you to defer taxes on your retirement savings, meaning that you get to keep more of your money, and finish your investing journey with a bigger retirement portfolio.
- -Investment options: International pension plans offer a wide range of investment options, including different currencies and global investments. This can help you diversify your portfolio and potentially increase your returns.
- -Control: With an international pension plan, you have control over your retirement savings – not politicians. You can decide how much to save and when, how to invest your money, and when to withdraw your funds.
- -Professional advice: You can choose to nominate a professional advisor to manage your pension plan, which can be beneficial if you are not familiar with financial planning and investment strategies.
- -Peace of mind: Knowing that you have a plan for your retirement, regardless of where you are in the world, can provide a sense of security and help you focus on enjoying the present.
- -Portability: An international pension plan is portable, meaning you can take it with you wherever you go in the world, which can be especially beneficial for foreign residents in Japan who may not stay in the country indefinitely.
How to Get Started
Before choosing an international pension plan, you need to consider your individual goals. Do you have a retirement country in mind, already? What is your intended timeline for retirement? Will you need to keep providing for your children or paying educational expenses after you stop working? Answering questions like these will help you determine the best retirement plan for your personal needs.
Retirement planning can be challenging, but it remains one of the most important things you can do to secure your family’s future. Fortunately, a financial advisor can make the process easier. An experienced advisor can help you navigate your investment options and make the best decisions to reach your personal goals. Don’t wait to start planning for your retirement. Speak to a trusted expert today to ensure a stable future for you and your family.
