Last week I explained why safe withdrawal rates in Japan should be 3.5%, not the 4% that American FIRE blogs recommend. Sequence of returns risk means you can't safely withdraw the full expected return of your portfolio. The math was brutal but necessary.

But I'd missed something huge.

My wife asked me the question that would unravel my entire calculation: "Did you remember we'll both get pensions at 65?"

I stared at the Nenkin Net tab I'd opened weeks ago but never actually calculated. Two pension types. Different amounts. Money we're already paying into every month through salary deductions. Money I'd completely ignored when calculating our ¥100 million FIRE target.

When I finally closed my laptop that night, our FIRE number had changed by millions of yen. The difference came down to understanding Japan's dual pension system and how it integrates with early retirement math.

The problem? There are TWO pension systems in Japan, not one. And I'd been conflating them for years.

This is what stopped me cold: If you work as a company employee, you're paying into BOTH. The Kokumin Nenkin is the base layer everyone gets. The Kosei Nenkin is the employee bonus stacked on top.

The national average Kosei Nenkin (including Kokumin base) is about ¥1.45M per person—though this average includes many with shorter work histories. Full-career employees with above-average salaries can reach ¥2.5-3M. For a dual-income couple where both worked 35-40 years as employees? Total household pension could reach ¥4-5M per year. The typical full-career dual-income couple receives around ¥3-3.5M.

I'd been planning to live on ¥4M per year. And I'd been ignoring the fact that our combined pension could cover most or all of that starting at age 65.

Here's where employment history changes everything about your FIRE number.

You need ¥67M in invested assets at age 65. If you want to retire earlier, add a buffer for the pre-pension years (roughly ¥20-25M for ages 45-65). Total FIRE number: about ¥87-92M.

If both spouses worked as full-time employees for 35-40 years with above-average salaries:

The pension could cover your expenses entirely starting at 65. You only need a portfolio to bridge the early retirement years. With average pensions (¥3-3.5M), you'd still need a portfolio to cover the remaining gap—but far less than Scenario A.

Scenario C: Mixed Employment (One Employee, One Self-Employed)

This is us. I've worked as an employee for about 15 years. My wife worked full-time for 10 years before going part-time. Our combined pension estimate:

Our employment history cut our FIRE number from ¥100M to approximately ¥73M. A ¥27M difference. That's years of working life.

Here's the framework I now use to calculate our actual Japan FIRE number:

Step 1: Log into Nenkin Net (ねんきんネット)

Go to nenkin.go.jp and register if you haven't. The site shows your projected pension amounts for BOTH Kokumin Nenkin and Kosei Nenkin (if applicable). These are YOUR actual numbers based on your contribution history, not my estimates.

The interface is in Japanese, but the key numbers are clear. Look for:

Step 2: Calculate Total Household Pension

Add up all four potential sources:

This is the annual yen amount you'll receive starting at age 65. It continues for life.

Step 3: Calculate Your Portfolio Need at Age 65

If your pension covers all expenses, your portfolio need at 65 is zero (or just a safety buffer). If there's a gap, divide it by 3.5% to find the portfolio size needed to sustain withdrawals indefinitely.

Step 4: Add Pre-Pension Buffer

If you're retiring before 65, you need to bridge those years entirely with your portfolio:

The multiplier (0.5-0.7) accounts for portfolio growth during drawdown. The earlier you retire, the larger this buffer needs to be.

Step 5: Build in Safety Margin

Add 10-20% buffer for:

I don't want to over-rely on pension projections 20+ years out. The pension provides a floor, not certainty.

Step 6: Calculate Monthly Savings Target

Once you know your target, here's how much you need to save monthly to reach it by age 60 (assuming 5% real returns):

Scenario A: Self-Employed (need ¥67M at 65)

Scenario B: Full-Time Employees (need ¥30M bridge)

Scenario C: Mixed Household (need ¥73M total)

The difference between starting at 25 versus 35 in Scenario C? ¥58,322 less per month. That's the compound interest advantage of time.

These are frameworks based on 5% real returns. Adjust the targets based on YOUR actual expenses and pension projection from Nenkin Net.

Last week, I updated our family financial plan with these pension-integrated numbers.

We're currently mostly invested in eMAXIS Slim All Country through NISA and iDeCo accounts. We're in Scenario C: mixed employment history. Our combined pension projection is ¥2.95M. Our expenses are ¥4M. Gap: ¥1.05M. Portfolio needed: ¥73M total (including pre-65 buffer).

At our current savings rate of ¥2.1M/year, we could reach ¥73M in approximately 13 years. FIRE age: 43-44.

My wife's first question when I showed her the spreadsheet: "So we can actually do this?"

My answer: "If we maintain savings rates, keep expenses at ¥4M, eMAXIS Slim delivers 5% real returns, we stick to 3.5% withdrawals, and we're willing to cut spending by 20% if we retire into a bad sequence—yes."

The second question: "What if the government reduces pension benefits?"

That's the risk I can't control. What I can control is building a portfolio that could sustain us even WITHOUT pension. The Scenario A number (¥87-92M) is my worst-case target. The pension becomes a bonus layer, not the foundation. If benefits get cut 30%, we adjust spending. If they don't, we have excess wealth to pass to Lily or increase our lifestyle.

I'd rather plan conservatively and be pleasantly surprised than plan optimistically and run out of money at 75.

Here's what I wish someone had told me three years ago when I started planning FIRE in Japan:

Japan has TWO pension systems. If you've worked as an employee, you're paying into both. The Kokumin Nenkin (国民年金) is the baseline everyone gets. The Kosei Nenkin (厚生年金) is the employee bonus stacked on top. Conflating them means you'll miscalculate your FIRE number by millions of yen.

Your employment history determines your pension. Your pension determines how much you actually need to retire. Check YOUR numbers on Nenkin Net. Don't use my estimates.

And most importantly: The Japanese pension system is an asset you're already paying for every month. It shows up as deductions on your salary statement. It's real money you'll receive starting at 65. Factor it into your calculations.

For our family, recognizing these realities changed when we can achieve FIRE and how we think about the life we want to build for Lily. We went from "this feels impossible" to "this is achievable in 14 years with discipline."

The math works. The system is there. You just need to understand how the pieces fit together.

📋 This Week's Actions:

We're building this carefully, systematically, with math designed for the country we actually live in. 仕組み化 (systematization) isn't about perfect predictions. It's about using the most accurate inputs you can find, building in safety margins, and executing with discipline over decades.

That's how you build wealth that lasts in Japan. That's how you retire with confidence knowing you've accounted for the systems that actually exist here.

Your move.

P.S.

Next week in Part 3: We will take a step away from the technical to share framework to understand what is “enough” for you as that will set the foundation for your retirement planning!

【免責事項 / Disclaimer】This content is for educational purposes only and does not constitute investment advice. Investment decisions are made at your own risk. Future pension benefits are subject to change by government policy.

Stay Wealthy

Jason

Building wealth for English-speaking permanent residents in Japan, one story at a time.