Is 30 million yen the necessary funds after retirement? What matters more than money to survive the 100-year life era
From the Financial Services Agency, a report titled"Asset Formation and Management in an Aging Society" (Draft)has been issued. In summary, it contains the following contents.
- With increasing longevity and declines in income and retirement benefits,the longer you live, the more money you will run out of
- For households relying on pension living,an average monthly deficit of 50,000 yenis projected.In 20 years 13,000,000 yen, in 30 years 22,000,000 yenin assets need to be drawn down
- In preparation for future capital shortfalls,you should undertake self-reliant asset formation.
In response, there is an outpouring of arguments claiming that the government is too irresponsible. Weren’t the pension system supposed to be “100 years of security”?
However, looking at the population structure, it has been clear for 20 years that this would happen. The government bears responsibility for letting it go this far, but there is nothing to complain about once you voice it.Smart people need to take action themselves.
To address the “longevity risk,” there are two main things we can do.
- Work as long as possible
- Build wealth from a young age
Continuing to work is the best of all. Find a job you can enjoy
If you can keep working, you won’t have to worry no matter how long you live. Even without savings, you shouldn’t have major problems.
In fact,the labor force participation rate of Japanese men aged 65–69 is 55%, unusually high among advanced nations.
If the pension eligibility age is raised, the elderly labor force participation rate will rise further. With ongoing labor shortages, there will be plenty of opportunities to work. This alone seems to resolve many social issues.
However,the problem is whether the job is enjoyable. Continuing in a job that isn’t enjoyable is only painful. If you think you don’t want to work until that old age, your current job probably isn’t enjoyable.
In other words,the fundamental solution is to find a job you enjoy. Even if it isn’t high pay, if you can earn your living, you don’t need to work overtime every day.
As for me, I like my current work and do not plan to retire for life. It isn’t physical labor, so as long as my brain works, I can continue. Therefore, I have no particular fear of aging.
If you want to do something other than work, build assets. If you keep at it, opportunities will surely come
On the other hand, some people want to spend their old age calmly without working, or have things they want to do that aren’t their job.
In that case,you need to engage seriously in asset formation.
The Financial Services Agency recommends “long-term, regular, and diversified” investing, in other words, regular investments in index funds. It is a very steady method and,if you think long-term, it is more advantageous than deposit money.
However, this method has a weakness. It is thatyou do not acquire investment knowledge.
Investing a fixed amount every month into the same fund and just watching the results. It’s certainly low effort and easy, butthe expected return is about 7% per year. Saving 500,000 yen per year and after 20 years you’ll finally reach 24,000,000 yen.
Moreover, this is all theoretical;when you start when the market is overvalued, expected returns drop significantly. Regularly investing is a form of “thinking stop,” so you cannot judge whether it is overvalued.
For example, the Lehman Brothers collapse. The world was engulfed in pessimism, butinvesting in the Nikkei index during that time would have tripled in 10 years, about 11.6% per year.
If, instead of the Nikkei average, you had invested in Nitori (9843),you would have gained sixfold in 10 years, about a 19.6% annual return.
The bottom line is the ability to select stocks and time your investments. If you start using your head and invest in individual stocks as early as possible, you can reap big benefits when opportunities arise. If you continue this, reaching 20,000,000 yen isn’t a dream, perhaps even 100,000,000 yen could be possible.
Abenomics produced many “millionaire-to-be” people, butmost of them were people who had been investing in individual stocks since before the Lehman collapse. It is important to start early and keep going.
Money is just a means. Find the purpose of life
However,becoming a billionaire is only a means. Once you are freed from economic anxiety, you should find what to do next.
If you love your job, you can keep it; if there is something else you want to do, you can pursue it without worry.Having money means having more choices in life.
What is truly important ishow you want to live. The great investor of the Meiji to Showa era,Shizuro Hondabuilt assets worth 10 billion yen in today's value while fulfilling his role as a university professor, and achieved work that left a mark for future generations, such as the design of Hibiya Park.
To reiterate, money is not the goal but a means. Increasing the means expands the goals you can achieve.
My work is to help you increase the money that serves as a means to life. Andthe task of finding your purpose lies with you alone.
