More and more we see this commentary.
The talk has been that, when the planned second phase of the consumption tax hike begins in October 2015 (from 8% to 10%), Japan will reduce the number of years needed to qualify for a public pension from twenty five down to ten.
This will be a great change for anyone from a non-totalization country, one that doesn’t have the agreement that allows you to combine years paid in Japan with years paid in at home. To the contrary, it will actually be detrimental to Americans, because it’s more likely that Windfall Elimination will kick in to modestly reduce your social security benefit. As it stands, if you need to rely on the totalization treaty to get your Japan benefit, then Windfall Elimination does not apply. If you don’t need the totalization treaty, then the Social Security Administration will modify the “90% bend point” boost that all social security checks contain, under the theory that you are double-dipping in two pension systems.
If you are covered by Kosei Nenkin in Japan, then perhaps that’s neither here nor there, since the Kosei Nenkin formula is more generous than Kokumin Nenkin.
However, if you are paying Kokumin Nenkin, you are effectively being haircut while not really getting the benefit of a “double dip” in two pension systems. About half of the Kokumin Nenkin payout would be used to reduce whatever amount of the social security check you would otherwise receive. (So a $150 nenkin check would trigger Windfall Elimination and reduce the social security by $75. You are still ahead $75, but you made the full monthly Nenkin payment to get that.)
Is this yet one more reason why Americans in Japan should be in the proper Japanese retirement program? YES! Do you think Caroline and our embassy are going to do anything about this? NO! Will the State Department in Washington footnote it in the annual country report? MAYBE.
As I reported to you earlier this summer, we now pay 40,000 Japanese $10 million a year in social security benefits for which they would otherwise not be entitled to. Rightly so, you know. People deserve a retirement.
But that means Americans in Japan also deserve a retirement.