iDeCo & NISA 2025 Guide: Maximize Your Tax-Free Investments -Free Download
If you’re living in Japan and thinking about saving or investing for your future, you’ve probably come across two major options: iDeCo and NISA. Both offer powerful tax advantages, but they serve different purposes. Let’s break them down!
✨ I’ve also posted a iDeCo & NISA 2025 Comparison Sheet—grab it from the Freebies Shelf on this site!
What Are iDeCo and NISA?
iDeCo (individual-type defined contribution pension plan) is designed for retirement savings. You contribute monthly, and your money grows tax-free until retirement. Contributions are tax-deductible, but withdrawals are taxed (with some exemptions). It’s a long-term, lock-in investment plan ideal for people serious about retirement planning.
NISA (Nippon Individual Savings Account) is a general investment account with tax-free benefits on capital gains and dividends. Unlike iDeCo, you can withdraw your money anytime, and it’s more flexible. The new NISA system (launched in 2024) has two components: a Growth Investment account and a Stable Investment account, each with its own annual contribution limit.
Without using iDeCo/NISA, basically Capital Gains/Dividends are taxed 20 %!!!
Who’s Eligible – You are required Resident card and my number.
iDeCo: Any resident enrolled in Japan’s National Pension under 65 with a taxable income.
NISA: Any resident of Japan over the age of 18. No employment or income requirement.
Investment Limits: How Much Can You Put In?
iDeCo: Caps depend on your category (see above). Self-employed get the max (¥816,000/year), while employees hover around ¥240,000-¥276,000. It’s monthly, steady, and locked in.
NISA: Bigger playground. Tsumitate lets you invest ¥1.2 million/year ($16,000 USD) for lump sums. Total annual cap across both is ¥3.6 million. Lifetime limit is ¥18 million, with Growth capped at ¥12 million of that.
Takeaway: iDeCo’s smaller and rigid; NISA’s flexible with room to grow—¥18 million tax-free is a game-changer.
Tax Benefits: Why Bother?
iDeCo: The king of tax perks. Every yen you contribute is tax-deductible—shaving your income and resident tax bill. Growth (capital gains, dividends) is tax-free too, though withdrawals after 60 are taxed as retirement income.
NISA: No deductions on contributions, but all growth—capital gains and dividends—is tax-free forever. Sell at a profit, you can keep it all.
Timing: When Can You Use the Money?
iDeCo: Locked until 60 (or up to 75 for payouts). Early withdrawal’s rare—only if you leave Japan with tiny contributions (<¥250,000). It’s a long game for retirement.
NISA: Anytime. Sell stocks, cash out gains, no penalties. Tsumitate’s built for long-term, but you’re not chained to it. Permanent since 2024—no old 5-year expiry nonsense.
Takeaway: iDeCo’s a commitment; NISA’s your flexible friend.
What Can You Invest In?
iDeCo: Safe-ish options—fixed-term deposits, insurance, mutual funds. No individual stocks or ETFs, keeping it low-risk for retirement.
NISA:
Tsumitate: NISA-approved mutual funds for long-term growth—no short-term funds (<20 years) or monthly dividend payers.
Growth: Stocks, ETFs, REITs, broader mutual funds. Excludes risky stuff like stocks under special supervision.
Reinvestment: Both let you reinvest gains tax-free—iDeCo within your cap, NISA up to ¥18 million lifetime.
Real-Life Fit: Which One’s for You?
New Grads: NISA’s your starter. Low income means iDeCo’s tax deduction isn’t huge yet, and you might need cash before 60. Start with Tsumitate—¥1.2 million/year grows quietly.
Mid-Career Expats: iDeCo shines if you’re staying long-term—¥276,000/year tax-free growth plus deductions is clutch. Pair it with NISA’s Growth for flexibility.
Self-Employed: iDeCo’s ¥816,000 cap is a no-brainer—max tax relief. Add NISA for extra investing juice.
Short-Term Expats: Skip iDeCo—locked funds don’t suit a 2-year stint. NISA’s anytime withdrawals fit your timeline.
Getting Started
iDeCo: Pick a provider (Recommendation - SBI, Rakuten, as those are on-line securities, so management fee is slim to none.), submit via your employer or direct. Takes 1-2 months—HR can help.
NISA: Open at any broker (SBI, Monex). One account, permanent, done online. English options exist—Rakuten’s decent.
Data Check: This aligns with official sources—ideco-koushiki.jp and fsa.go.jp—as of 2025.
Wrap-Up: Your Move
iDeCo is your retirement anchor—tax perks now, financial security later. NISA is your wealth builder—flexible and tax-free for life. It’s up to you how you invest, but if you choose to invest outside of iDeCo or NISA, don’t forget about taxes on capital gains and dividends. Ouch!
Both are government-backed programs designed to shift Japan’s savings-focused mindset toward long-term investing. While I’ve introduced both schemes here, I highly recommend speaking with a professional or your financial advisor before making any major decisions.
Good luck—and happy investing!