iDeCo in Japan: Investments for Retirement
What is iDeCo?
The iDeCo (個人型確定拠出年金 - kojin-gata kakutei kyoshutsu nenkin) is Japan's Individual-type Defined Contribution pension system, similar to a 401(k) in the United States. It's a tax-advantaged retirement savings plan that allows individuals to make voluntary contributions toward their retirement while receiving significant tax benefits.
Simply put, an iDeCo account is just an investment account with tax advantages. Inside of your iDeCo account you have the option to invest in many different types of investments (such as ETFs) depending on your risk tolerance.
Who is eligible to contribute to iDeCo?
The iDeCo system is available to workers in Japan, though contribution limits vary by employment status. The following types of workers are eligible:
| Employee Type | iDeCo Category |
|---|---|
| Company Employees | Category 2 Insured Person |
| Public Servants | Category 2 Insured Person |
| Self-Employed Individuals | Category 1 Insured Person |
| Part-Time Workers | Same as Company Employees or Self-Employed Individuals, depending on enrollment. You should confirm with your employer. |
| Full-Time Homemakers | Category 3 Insured Person |
What are the iDeCo contribution limits (2024)?
Monthly contribution limits vary based on your employment status and enrollment in other pension systems. Try using our helpful iDeCo Contribution Limit calculator to figure out what you maximum contribution limit is.
| Employment Status | Monthly Contribution Limit |
|---|---|
| Self-Employed Individuals | ¥68,000 |
| Company Employee (no corporate DC) | ¥23,000 |
| Company Employee (with corporate DC) | ¥55,000 |
| Public Servants | ¥12,000 |
| Full-Time Homemakers | ¥23,000 |
Other Important Considerations:
- Changing jobs or employment status may affect contribution limits
- Once enrolled, contributions can be adjusted or suspended as needed
Newly Announced Changes (2025): What are the new iDeCo contribution limits?
In December 2024, the Japanese government has announced a significant increase in the upper limits of iDeCo contributions. The exact date that the increase will take place has not yet been formally announced, but the limits changes have been. It is expected that these changes may take effect later in 2025, or even 2026.
| Employment Status | Monthly Contribution Limit |
|---|---|
| Self-Employed Individuals | ¥75,000 + ¥7,000 |
| Company Employee (no corporate DC) | ¥62,000 + ¥39,000 |
| Company Employee (with corporate DC) | ¥62,000 + ¥7,000 |
| Public Servants | ¥20,000 + ¥8,000 |
| Full-Time Homemakers | ¥23,000 |
How do iDeCo tax benefits work?
There are significant tax benefits to contributing money to your iDeCo account. Similar to other tax advantaged accounts like the NISA, iDeCo is one of the absolute best ways to prepare for retirement.
Contribution deduction: All contributions are tax-deductible from both income tax and resident tax
Investment gains: No taxation on investment gains during the accumulation period
Withdrawal benefits: Favorable tax treatment on pension payments during retirement
A Quick Example:
If you're a Company Employee (Category 2 Insured Person) in the 20% income tax bracket, contributing the max of ¥276,000/year saves:
- Income tax: ¥55,200 (20% × ¥276,000)
- Resident tax: ¥27,600 (10% × ¥276,000)
For a total tax savings of ¥82,800/year.
Learn more about how iDeCo can lower your taxes. Try our advanced tax calculator →
Quick look at a few iDeCo providers
The following providers are the most common options for foreigners looking to open an iDeCo in Japan. Note that English support isn't offered at these services, but using translation tools is often enough to navigate their sites.
Major iDeCo Providers in Japan:
SBI Securities (SBI証券) Offers a wide range of low-cost investment trusts and one of the most user-friendly online platforms.
Rakuten Securities (楽天証券) Known for their integration with Rakuten points system and competitive fee structure. They provide a good selection of both domestic and international investment options, including their own branded investment trusts.
SMBC (三井住友銀行) Offers a balanced mix of conservative and growth-oriented options, with strong support for traditional bank-based investment products and principal-guaranteed options.
Retirement Withdrawal Rules
iDeCo benefits are accessible starting at age 60 if the participant has contributed for at least 10 years. If contributions are fewer, eligibility is delayed based on the following schedule:
| Years of Contributions | Eligible Withdrawal Age |
|---|---|
| 10 years or more | 60 |
| 8–10 years | 61 |
| 6–8 years | 62 |
| 4–6 years | 63 |
| 2–4 years | 64 |
| Less than 2 years | 65 |
Withdrawal options (Installments vs Lump-Sum)
Participants can choose how to access their iDeCo savings:
- Pension Payments: Installments over a minimum of 5 years, providing steady retirement income and potential tax benefits.
- Lump-Sum Withdrawal: A single payment, taxed with the Retirement Income Deduction.
- Combination: A mix of lump-sum and installment payments.
In general, lump-sum withdrawals work best if you have a long contribution period and don’t need a steady income. Instalments are better for spreading income over time, especially if you’ve used your retirement deduction elsewhere.
Can I withdraw from my iDeCo early?
Early withdrawals are generally prohibited except in extrenuous circumstances such as:
- Severe Disability: Qualifying participants may access their funds early.
- Death: Benefits transfer to beneficiaries.
- Permanent Departure from Japan: Participants leaving Japan permanently can apply for an early lump-sum withdrawal.
What happens to my iDeCo if I leave Japan permanently?
In general you can keep your iDeCo account open even after leaving Japan and continue to receive the tax-free investment growth in the account until retirement. You won't be able to make new contributions while abroad.
However, you may wish to close your account and take the money upon leaving Japan. In this case, you have to start the process for a "Lump-Sum Withdrawal" (脱退一時金 - Dattai Ichiji-kin).
Required documents for early withdrawl
- Pension Lump-Sum Withdrawal Claim Form (脱退一時金請求書)
- Passport copy
- Proof that your Basic Pension Number is deleted
- Your bank account details
- Official documentation showing you've left Japan
From your total iDeCo balance, the Japanese government will automatically deduct both 20% income tax and 0.42% special reconstruction tax from your total.
6-month window rule
There is only a 6-month window after leaving Japan to initiate the withdrawal or you will have to keep your iDeCo account open.