My in-laws' place is in an incredible location

We're still working on the house project. Quick summary:

1. My wife's parents live about 20 minutes from us, in a 40-year old steel frame house.
2. We first considered knocking their house down and building a two-generation house so we could live with them, but this didn't work out for a number of reasons.
3. Now we are thinking about renovating their house so it is more comfortable for them and so we have some space if we need to stay with them.
4. The house is already in my wife's name and we'll pay for half of the renovation.

​We had another series of meetings with Ishiguro Architectural Workshop. Things were dragging on a bit, so I asked them to price out three options: just insulation, insulation + redoing the interior, and the full monty.

Option 1, just insulation, includes insulating the walls, floor, and ceiling, changing the front door, adding interior double windows, and changing the bathroom. It comes to 8.3 million yen.

Option 2 is basically option 1 as well as a complete interior remodel giving us a more senior-friendly floorplan and a nice space upstairs for my wife and I (or other visitors) to use. This comes to 15.9 million.

Option 3 is the first two options plus increasing the airtightness, a new heating system, ventilation system, and thicker insulation. It comes to 18.9 million.

IAW seem to specialise in custom interiors, so asking them to do option 1 is a bit of a waste. They also seem to want to do the interior, and are very proud of their past jobs (they keep encouraging us to visit their previous projects).

I think we're going to go for the full-spec job on this, so I expect we'll end up paying around 10 million yen (half of the total). This doesn't make much financial sense to me except that it is something my wife wants to do for her parents, and so that is good enough for me. 10 million is also a lot less than the 23 million that would have been our half of the new-build price ;)

We also have to think about how to pay for this, basically either with cash or by taking out a loan.

I've spent a long time arguing about this with frequent contributor DA and in this instance have decided he's probably right. Instead of taking out a loan for our share of the 10 million (I found a special deal for public servants which would lend us 10m at 1.3% for ten years) we will instead sell some shares to do so.

In fact I sold the shares last night. My wife had a TOPIX index fund that was up 44% so instead of risking the value falling before we need to pay for the house later in the year we are going to cash instead.

If you will need money in the short term (1-2 years), or the medium term (up to five years) it may not be a good idea to invest it in the stock market. You might lose out on some profits, but you avoid the risk of losing money just before you need it.

We may or may not end up living in the house eventually (although I suspect my MIL will outlive me), but it is in a wonderful location on the edge of a public forest. It would be a very pleasant place to spend weekends and lazy summer mornings.

What do you think? Do you have experience of renovations in Japan? Any advice?
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Found something interesting on Reddit this week. Made me laugh, then made me worry slightly. Does everyone hate the writing style on RetireJapan?
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I haven't noticed any notable news stories, so here are some links I found interesting this week.


Who is your boss? Are you happy with that? Always enjoy Derek Sivers' writing, even when he's writing for musicians.

This week's millionaire interview. Pretty solid and relateable this time.

How to grow your net worth $1m in four years. Of course, eh?

How much is enough? A really important question. Getting this right can transform your life.

A few factors that will affect your safe withdrawal rate in retirement.

The Wealthy Accountant reminds us to work on the small, permanent money improvements. I have an electrician coming round next week to look into changing mercury lights into LEDs.

Very in-depth and very long article about technological unemployment. Are machines replacing human workers? Are new jobs being created as the old ones disappear?

Some thoughts on mental preparations for retirement. Mindset might be more important than money.

If you are under 40 you should be hoping for a stock market crash. I really hope we have a bad one sometime in the next couple of years...

Cooking at home is healthier and saves money. I need to get better at this.

Live like a student now so you can live like one later, too. After all, students basically do what they want all day (at least they do in the UK. Japanese ones, not so much).

Do rich people own stocks because they are rich? Or are they rich because they own stocks? I suspect it might be the latter.

How safe withdrawal rates actually work in practice, and why you probably won't run out of money.

Nippon Life is bearish on Japanese equities.

The secrets to financial success are revealed in this nice little write-up. They turn out to be rather obvious. Doesn't stop them working, of course.

Buffett has said it before, but you don't need more than average intelligence to be a good investor. EQ and and an understanding of principles and history are much more important. This post by Ben Carlson makes the argument that being smart is actually a net negative.

Incredible if someone isn't aware of this, but ten years ago I was not following this basic rule of personal finance. Do yourself a favour and make it iron-clad in your life.

Tynan writes another thought-provoking post this week: how to avoid worrying about things.

Collaborative Fund shares their interesting articles of the week. I particularly enjoyed the car-sharing article. Pretty soon we'll all be getting rid of our cars.

I booked a hotel with Booking.com and was reminded how much I like their service. Sign up with this link to get 1,800 yen when you book next.

This article explains how Amazon organises their warehouses: TLDR they don't. A bit like my office, except that I don't have a database in the cloud keeping track of where everything is...

​Seth Godin makes a good point about sunk costs as only he can. I have a lot of projects I probably need to clear out of my head.

Phew. Anything you enjoyed in there? Do you miss the randomly bolded words in this post? Let us know in the comments :)

I saw this post by Retire by 40 the other day, and liked the concept enough to rip it off :)

From his list, I agree with four items, completely disagree with another four, and we already have the other two... see if you can guess which are which, and I'll tell you at the end of this post.

First of all, let's define rich. I think rich is a net worth over $5m, giving a passive income of $100,000-200,000. We are a very long way from this, although there is a small chance we will get there at some point, particularly if Ray Kurzweil is right.

Also, I don't think being rich is something you need to be happy. I think happiness comes from purpose, from connection, from health, and from freedom. Being rich might help a little with some of those, but not necessarily. We're already rich in experiences and opportunities.

But back to the task at hand. What ten things would I buy if money was less of an issue than it is now?

1. Driver
I hate driving and am not good at it. I keep having minor accidents. The first thing I would do is stop driving and use taxis. This is likely to be cheaper than owning a car fairly soon anyway, so I predict this will happen whether I end up rich or not.

2. Gym/trainer
I actually enjoy working out, but don't like sharing squat racks with others. A personal gym and a trainer to help keep me accountable are a luxury I would be happy to splurge on.

3. Housing
I would probably buy/build a new house in a beautiful location. Failing that, I might consider renovating our manshon. A manshon is basically a concrete box, so you can rip out everything and remake the interior layout from scratch. It would be nice to have a room design that perfectly matched our needs.

4. Clothes
I would get some nice clothes and shoes. I don't think much about clothes but enjoy wearing comfortable ones. Getting some help with this would be a good investment. Ideally I'd end up with a few outfits that I wouldn't have to think too much about.

5. Furniture/house stuff
Well made things are a pleasure to have around and to use. I have some saucepans I got from my grandmother. I have no idea how old they are but they ooze quality and are a pleasure to use. Buying some quality furniture and kitchen stuff seems like a no-brainer if you can afford it.

6. ​...

​I can't really think of anything else.

The funny thing is that we could buy all the stuff on that list already, it's just not a priority at the moment (I'd rather have more cash flow before increasing our spending).

From RetireBy40s list, we already have a cleaning lady who comes in once a week and does a couple of hours, and we travel first class on airplanes every so often using air miles. Both of these are well worth it to us.

I much prefer to borrow things (hotels, taxis) than buy them and pay the associated costs (houses, cars).

How about you? Any unmet needs? What would you buy if money was no object?

A few weeks ago a reader posted some information about checking your credit in Japan, so of course I decided to check it out for RetireJapan.

There are three credit bureaus in Japan: CIC, JICC, and the snappily named 全国銀行協会個人信用情報センター. Today we'll be looking at the JICC process and results.

It's a little bit involved, but not difficult.

The whole process took four days, from making the application on Sunday night to receiving the documents by registered mail on Wednesday.

First, you need to download the JICC app. You make the application and upload documents using the app.

Then, pay 1,000 yen with a credit card.

Finally, sign for the letter with your results in person.

So what was my score? I was a bit disappointed to find that they didn't provide one. No number I can humble-brag about ;)

What the report does show is all the loans, contracts, and credit cards I currently have open, as well as recently closed ones. It shows availabe and used credit. I don't have any, but presumably it would also show late payments or defaults.

It found my mortgage and current credit cards. It also found my old Softbank installments (so buying a phone over two years seems to count as a loan) and lots of closed credit cards.

I was pleased not to find any unfamiliar cards or loans.

So is it worth getting your credit report from JICC? Probably not. It is useful to check for unusual activity. It might be worth doing before an important mortgage application, just to make sure everything is okay, but probably not essential. It might also be worth doing if you are getting turned down for credit cards and aren't sure why.

I also found this full-service law firm that will do all the paperwork to check your credit report with all three bureaus and then explain the results to you. They charge 10,000 yen though, just over three times what it would cost you to do yourself (and you probably don't need to check all three so maybe even more). Given how easy it was to check JICC, this probably isn't necessary.

How about you? Have you ever checked your credit in Japan? Are the other two bureaus any different from JICC?

For the last couple of years we've been posting links to interesting articles on Facebook. Unfortunately that means that most of our readers will never see the vast majority of them because Facebook has a policy of only showing content to a fraction of the people who like a page (unless you pay them to show it to more, of course).

Assuming this kind of aggregration/link post is useful it might be better to have it here on the blog and going out in the weekly email on the day it is posted. We'll continue putting links on Facebook and then writing them up here.

​A hidden danger of condo ownership.
Wonderful article on buying when stock markets fall. Read this even if you don't read any of the other links!
Tynan on optimizing your life. Spend something to get something.
Journalists might not be the best people to listen to about investing.
The sky is falling! Well, the markets are at least.
​Apparently the markets corrected last week.
The 39th millionaire interview.
​Get rid of your weird money hang-ups.
Japan is tweaking the way it charges for health care.
​Is investing an art or a science?
Heading for a single digit P/E ratio?
Millenial or not, don't invest like this.
What is best in life?
​Working in Japan seems like a dumb move for a promising foreign graduate.
Do women and technology mean Japan doesn't need immigrants?
You may be able to defer your pension into your mid-70s in the future.
Are you aware of the process for getting rich?
A pretty convincing article on why you might want to consider not living as long as you could. Similar thoughts to those in Being Mortal.
Be afraid of people who tell you they know what is going to happen. Witches, all of them.
Whatever decision you make, it may not be worth second-guessing it.

What do you think? Is this useful or fluff? Let us know in the comments. Anything you particularly enjoyed?

You may remember we were talking about the inheritance tax reforms last year. Basically short-term residents (under ten years, working visa) were not liable for inheritance tax on estates outside Japan. At the same time long-term residents (over ten years, spouse or PR visa) became liable to pay Japanese inheritance tax for up to five years after leaving Japan.

We wondered how that might be enforced, and lots of expats complained bitterly about the new rules.

Well, it seems like the government blinked.

David Wagner posted a link to this article on Twitter. Basically the five years after leaving Japan will no longer apply, unless you are trying to game the system somehow. Nice face-saving solution for everyone.

The article also mentions a small change to how income tax is calculated (the basic deduction is going up while salary deductions are going down) and the introduction of a new 'leaving the country' tax, for the Olympics (this can be currently used to justify any new policy in Japan, of course) of 1,000 yen each time you leave the country (tourists and residents).

More on the domestic changes here. The consensus seems to be that highly paid employees will pay more tax and freelancers (self-employed, small business owners, etc.) will pay a bit less.

I guess it's a small net positive all round. Have a nice weekend!

A reader sent me this article about an annuity product on Monday and asked for my reaction.

​​I'm not too familiar with the annuity market here in Japan, so I thought this might be a good chance to take a look at what an annuity is, how to think about them, and of course to discuss the specific product our reader was asking about.

What is an annuity?

An annuity is a form of insurance against living too long. It's a promise to pay you a certain amount of money until you die.

A state pension is a type of annuity (maybe one of the best types, as it is guaranteed by a government and not a private company). This is why paying into the Japanese national pension or the UK pension can be a good idea.

You generally buy an annuity by paying a certain amount of money in exchange for regular payments. If you don't live very long, you lose out as you won't claim as much money as you paid. If you live for a long time, however, you can receive more money than you paid and most importantly you never run out of money.

What types of annuity are there?

There are many types. Typical variations include whether the annuity increases with inflation or not, whether your spouse can continue receiving it if you die first, and when the payments start. These factors make the annuity more or less expensive.

How should we think about annuities?

An annuity can be used to establish an income floor for your retirement. Together with any pensions, annuities can provide a minimum income that will hopefully meet your basic needs. This post explains the concept very well.

Another advantage of annuities is that they are a form of dementia insurance. It is quite possible that we will become unable to look after our investments in old age, becoming vulnerable to mistakes in judgement or fraud. An annuity can eliminate this risk by providing you a regular income regardless of what you do.

How about the product in the article?

The article describes a whole life annuity offered by Sumitomo Mitsui Banking Corp. The example given is a person who buys the annuity at age 60, then begins to receive payments in US dollars at age 70. The product yields 3%, so to break even the customer would have to live to 83 or 84 years old.

To make it sound more attractive, the article compares this to just keeping savings in cash and taking out a certain amount every month. I don't believe this is a very useful comparison.

There are several problems with the product as written:

1. It is denominated in US dollars, exposing the customer to exchange rate risk (if the yen gets stronger the payments will be worth less). Annuities are supposed to provide reliable income so this is not ideal.
2. The payments start ten years after handing over the cash. Some people will die before receiving a penny, and their families will lose out. Also, given historical rates of return you could expect a balanced stock portfolio to double over ten years.
3. The 3% yield is at the lower end of safe withdrawal rates (the amount you should be able to take out of a stock/bond portfolio without running out of money). Even keeping your money in cash and taking out 3% a year would give you 33 years of payments so again this does not seem particularly attractive.

I think there can be a place for annuities in retirement planning, but this product does not seem fit for purpose. Anyone who is willing to learn a bit about investing should be able to do better by investing in a simple portfolio, particularly if they use their iDeCo and NISA allowances.

What do you think? Are there any other examples of annuities in Japan? Anything worth looking at?

Enough time to lose to my granddaughter at Carcassone

Last year while spending a few days on Koh Samui in Thailand I wrote the first post on the benefits of having slack in your life.

​As in that first post, we'll be using the definition of slack as "the loose or unused part". 

Running at redline, or using all your capacity, in any area is stressful and potentially damaging over time.

• If you spend all your money you have no funds to deal with unexpected expenses.
• If you work all the time you may find your health is affected.
• If you spend all your time producing, you won't have time to plan.
• If you take the last possible train you will be late in the case of a delay.
• If you only think about others your needs might not be met.

​
Slack is important, maybe crucial. But slack also represents unused potential. The most profitable solution is probably to use 100%, at least in the short-term. In the long-term running at 100% may result in breakdowns.

I haven't been very good at making slack in my life. I have spent too much time working. I haven't taken the time to exercise. I don't spend much time with friends, or pursuing hobbies. There is a lot of room for improvement.

However, there may be a case to be made for limited periods of sprinting. Working full-out for five or ten years, investing as much as possible, then dialling things back once you have some passive income to supplement work is one solution that seems to work well.

So where can we find slack in our lives?

Money is a big one. The more of your income you spend, the worse your financial situation will be and the less slack you will have. Money slack often leads to time or emotional slack (more time and less stress) so reducing your spending or increasing your income can greatly improve your quality of life.

* Create slack by widening the gap between your income and your spending.

Time is another. If you are very busy, create slack by scheduling downtime like you would any other commitment. If you find yourself wasting a lot of time mindlessly, schedule more constructive uses of time like reading, meeting friends, spending time with family, relaxing offline, etc.

* Create slack by deliberately scheduling free time or leisure activities.

Peace of mind and contentment are the third. Taking on anything people ask of you, putting up with negative or toxic people, doing things because people expect you to can all take a toll on your psyche. When you are young and starting out in life and in work it can be necessary to put up with things, but the older you get the more you can exercise executive choice in these matters.

* Create slack by saying no to work you don't want, or people who don't make your life better.

My scorecard is somewhat mixed on this. I'm pretty good in the money and peace of mind areas (the former makes the latter much easier). However, I have not managed to whip my use of time into shape. Something to work on I guess.

How about you? Have you mastered slack in your life?

We've written about this before (in fact, it was the first post on the blog, and the reason RetireJapan was born).
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I received a very pleasant message from someone the other day asking about writing a guest post for the blog or posting in the forum. They offered to provide people with a free overview of their UK pension situation, followed by some tailored advice. This seemed interesting but also a bit too good to be true.

We exchanged emails and it turned out this person worked at one of the investment firms that target expats. They were completely pleasant, professional, and even self-deprecating throughout, so I am not going to write their name or the company they work for in this post.

However, this does illustrate very well how no-fee advisors get the initial meeting with potential customers (marks?). They offer to give you some advice for free, then get your confidence, then sell you some horrendous financial product.

Follow the money. If someone is providing a service for free, you need to ask why. They are probably getting paid somehow, and if you don't know how much the fee is there is a good chance that you wouldn't like it ;)

Be careful out there! Remember you can always post in the RetireJapan Forum to see what other people have to say about a potential investment before making it. The reason this site and community exists is to help us all make better decisions going forward.

How about you? Any stories to tell? What investments do you regret or are happy to have passed on?

I meant to write this on Monday, but instead had to call the market correction/crash ;)

As a quick follow-up to that post, I've read optimistic and pessimistic articles about the stock market. Bear in mind that no-one knows what is going to happen. If they did, they certainly wouldn't be on TV giving away their edge. And remember that most journalists writing about investing probably aren't investing significant amounts of their own money.

My advice: hunker down and ignore the noise. In a year or two you won't even remember what happened this week or this month.

But on to happier things. This is the 401st post on this blog. Once again, I missed the actual milestone post. Like I did with the 300th post too.

​It's interesting looking back at the 101st post. We listed five goals in it, and I think it's fair to say we have accomplished all five to a certain extent:

1. Build the community here and on the site's Facebook page. We now have 650 email subscribers and over 800 follows on Facebook. The forum is really good at answering questions. And we get a decent number of comments on some posts.
   
   
2. Write some short books on personal finance, investing, etc. Two down, quite a few to go. I used to think I could write four of these a year, but given the other ongoing projects I am working on that doesn't seem to be realistic. Going to shoot for one or two new books per year instead.
   
   
3. Learn more about helping people with their finances. Well, I didn't pass the Financial Planner test yet, but I have learned a lot about helping people. This year I started working with a few people one on one, and it's been very interesting so far. I'll make an announcement when I am ready to take on new clients.
   
   
4. Organize more public lectures and workshops in Japan. Sadly the online course didn't happen this time, but I do have a couple of lectures in the pipeline (they are not public, unfortunately). Please do contact me if you would like me to come and talk to your group.
   
   
5. Share more ideas from other people. Guest posts and reader profiles are some of my favourite posts on the blog. Please do get in touch if you are interested in contributing.

So I guess we should probably set some new goals. To make things extra interesting, they should probably be somewhat ambitious, so that I have something to write about in post 1000 ;)

Here are some things we will try to do at RetireJapan by 2022 (when I am planning to leave my day job*):

1. Completely redesign the site to make it easier to find information and to help more people find RetireJapan. This will probably happen this year. You can help by telling people about us.
   
   
2. Create different ways for people to get information and help from RetireJapan, from the free resources on the site, to cheap online guides, and more personal bespoke services.
   
   
3. Develop the resource sections of the site to help people find quality service providers and products in Japan and abroad.
   
   
4. Get featured in mainstream media and other blogs/sites in Japan and abroad.
   
   
5. Found an annual conference for personal finance in Japan. 
   
   

Some real stretch goals in there, but nothing too impossible. It's not like we're trying to launch huge reusable rockets or anything.

How about you? Any ideas for the site? What should we be doing that we aren't already?

* me leaving my job has nothing to do with RetireJapan being profitable or successful. Quite the opposite, in fact!