I Ran the Numbers on My iDeCo Exit Tax — Turns Out I Can Just Take It All at 60

Last time, I wrote about how I’d never once thought about my iDeCo exit strategy. That post got way more response than I expected. Turns out a lot of people were in the same boat. And then it hit me — I still hadn’t actually done the math. I wrote a whole article saying “think about your exit plan” without ever running the tax simulation myself.

So I did it. Here’s what happened.

My Numbers

Quick setup before we get into it. If you’re not familiar with iDeCo, think of it as Japan’s version of a 401(k) — a tax-advantaged individual retirement account where contributions are tax-deductible but you can’t touch the money until 60.

Here’s what I’m working with:

• Mid-40s, about 15 years to retirement at 60
• Company retirement benefit (退職金 / taishokukin): roughly ¥10,000,000 (~$67K), based on 29 years of service
• iDeCo: started January 2019, contributing ¥20,000/month ($135), no plans to increase
• Current iDeCo balance: ¥2,281,320 (~$15K), with ¥1,071,870 in unrealized gains

That retirement benefit number is honestly a rough guess. Our company’s retirement system is one of those things where you read the explanation three times and still don’t get it. I bet a lot of people are in the same spot.

What Will My iDeCo Be Worth at 60?

¥20,000/month at 5% annual return for 15 more years, starting from ¥2.28M today. That gets me to roughly ¥10,000,000 by age 60.

Breakdown: the current ¥2.28M grows to about ¥4.74M with compound interest, and the new monthly contributions add up to about ¥5.35M. Total: around ¥10.09M.

Is 5% optimistic? Maybe. But after 7 years my unrealized gains are almost equal to my total contributions (¥1.07M gain on ¥1.21M invested), so it’s not crazy. At 3%, it’d be more like ¥7.5M. I’m using ¥10M to keep the math clean.

The “10-Year Rule” — And Its Evil Twin, the 19-Year Rule

Here’s where it gets interesting for Japan-specific tax nerds.

Japan has this thing called 退職所得控除 (taishoku shotoku koujo) — a retirement income deduction. It’s generous. For someone with 29 years of service, it shields ¥14.3M from taxes. The formula: ¥8M + ¥700K × (years over 20) = ¥14.3M.

Starting in 2026, there’s a new rule: if you take your iDeCo as a lump sum first and then receive company retirement benefits later, you need a 10-year gap between them to get the full deduction on both. That’s the “10-year rule” everyone’s been talking about.

But here’s what most articles don’t mention. Going the other direction — retirement benefits first, then iDeCo lump sum — you need a 19-year gap. Nineteen. Years.

So if you get your retirement money at 60 and wanted full deduction on a separate iDeCo lump sum… you’d need to wait until 79. The iDeCo deadline is 75.

Dead end.

When I googled “iDeCo 10-year rule workaround,” every article said “just stagger your withdrawals.” But that advice assumes you can take iDeCo first and delay your retirement benefit. For regular company employees whose retirement money comes automatically when they leave? There’s nothing to stagger.

I literally said “wait, seriously?” out loud when I figured this out. For people like me, the real options are: take everything at once and pay the tax, or convert iDeCo to a pension-style payout. That’s it.

Pattern A: Everything at 60, One Shot (My Preference)

This is the one I was hoping would work. Take both the retirement benefit and iDeCo as lump sums at age 60. Rip the band-aid off.

The retirement income deduction for 29 years of service: ¥8M + ¥700K × 9 = ¥14.3M.

When you receive company retirement benefits and iDeCo in the same year, the deduction is based on whichever service period is longer (29 years beats iDeCo’s 22 years). So the deduction stays at ¥14.3M.

Item	Amount
Retirement + iDeCo total	¥20,000,000
Retirement income deduction (29 yrs)	¥14,300,000
Taxable retirement income	(¥20M − ¥14.3M) × 1/2 = ¥2,850,000
Income tax + surtax	~¥190,000
Resident tax	~¥290,000
Total tax	~¥480,000
Net after tax	~¥19,520,000

¥480,000.

That’s it. ¥20M in, ¥480K in taxes. Effective rate: 2.4%.

When I plugged this into my spreadsheet and the number popped up, I just stared at it. I’d been bracing for something much worse. All those articles about the 10-year rule reform had me thinking “this is gonna hurt.” Nope. Not at my retirement benefit level.

Pattern B: Retirement Lump Sum + iDeCo as Pension Over 15 Years

I’d read articles claiming pension-style payouts save on taxes, so I ran this one too.

Take the ¥10M retirement benefit as a lump sum at 60. That fits within the ¥14.3M deduction, so: zero tax. Great.

Convert the ¥10M iDeCo into a 15-year pension: ¥670,000/year.

Ages 60-64: no other pension income, so the public pension deduction (¥600K) covers most of it. Taxable income: ¥70K/year. Falls within the basic deduction. Basically tax-free for five years. Nice.

Ages 65-74: here’s where it falls apart. Japan’s public pension (厚生年金 / kousei nenkin — the earnings-related tier, similar to Social Security) kicks in. For me, that’s estimated at ¥1.5M/year.

iDeCo pension ¥670K + public pension ¥1.5M = ¥2.17M/year. After deductions and basic allowance, taxable income is about ¥390K. Income tax plus resident tax: roughly ¥60K/year. Over 10 years: ¥600,000.

	Pattern A (Lump Sum)	Pattern B (Pension)
Total tax	~¥480,000	~¥600,000
When you’re done	Age 60 (instant)	Age 74 (15 years)
Annual tax filing	Not required	Required for 15 years
Effect on social insurance	None	National health + nursing care premiums increase

Wait, the Pension Route Costs More?

Yeah, that surprised me too.

The logic is straightforward once you see it. When your retirement benefit is around ¥10M, the retirement income deduction (¥14.3M) has plenty of room. Even adding ¥10M of iDeCo, the total is ¥20M — and the taxable portion after the deduction and the 50% rule is only ¥2.85M. That’s a 10% tax bracket world.

The pension route, on the other hand, adds iDeCo income on top of your public pension every year after 65. You slowly bleed through taxes, and — this is the part people forget — your national health insurance and nursing care premiums go up too because they’re calculated on income. Fifteen years of small cuts that add up.

“Spread it out” and “stagger your withdrawals” — that advice is for people with big retirement packages. ¥30M+. Not ¥10M.

A Colleague With a Totally Different Conclusion

I’d talked to a guy from our parent company about iDeCo a while back. His company has much better retirement benefits. He told me he was planning to take his iDeCo at 70 or later.

I ran the numbers with a ¥30M retirement benefit to see why.

¥30M retirement + ¥10M iDeCo = ¥40M. Same ¥14.3M deduction. Taxable retirement income: ¥12.85M. Tax: roughly ¥4,050,000.

Same “take it all at once” strategy, but the tax is over 8x higher. For him, staggering makes total sense.

That’s when his comment finally clicked. Someone with ¥30M in retirement benefits and someone with ¥10M need completely different exit strategies. “You should spread it out” isn’t universal advice. It’s advice for a specific financial situation that doesn’t apply to most of us.

A Quick Rule of Thumb

Based on my numbers, here’s how I’d think about it:

• Retirement benefit fits within your deduction → Lump sum, don’t overthink it. The hassle of spreading it out isn’t worth the savings
• Retirement benefit exceeds deduction by ¥1M+ → Worth exploring pension payouts or timing strategies
• Retirement benefit over ¥20M → Talk to a tax professional, seriously

For reference, the retirement income deduction by years of service (over 20 years, it grows by ¥700K/year):

Years of Service	Deduction
20 years	¥8,000,000
25 years	¥11,500,000
30 years	¥15,000,000
35 years	¥18,500,000
38 years	¥20,600,000

If your retirement benefit doesn’t blow past your deduction, the tax on a lump sum is surprisingly small. Just line up the numbers once. The picture changes fast.

I Want a Clean Break at 60

So yeah. My answer: everything at 60, lump sum, done.

¥480,000 in tax. Instead of paying ¥600,000 over 15 years of pension payouts, dealing with annual tax filings for a decade and a half, and watching my health insurance premiums creep up — I’ll pay ¥480K and close the book.

Honestly? I don’t trust my 60-year-old self to manage something that complicated. ¥300,000 at 60 is worth way more to me than ¥300,000 at 70. And under ¥1M difference? I’ll take it all at 60. No contest. If the gap were ¥2M… I’d want to ask my 60-year-old self about that one.

I wrote about how this number made me feel on Note — it’s a different kind of relief when the spreadsheet actually gives you good news.

(Quick caveat: this is all based on 5% returns and a ¥10M iDeCo projection. At 3%, the iDeCo would be around ¥7.5M and the tax even lower. Your retirement benefit amount will vary too. But the framework is the same — plug in your own numbers.)

The Anxiety That Disappeared After One Spreadsheet

Last article, I admitted I’d never thought about my exit plan. This time, I finally did the math.

The result was exactly what I was hoping for. I’d been vaguely terrified of the 10-year rule, worried that I’d need some complicated withdrawal strategy. Turns out, at my retirement benefit level, it’s barely a problem.

The gap between pre-calculation anxiety and post-calculation calm was worth exactly ¥480,000 of knowledge.

Looking back, I think the phrase “10-year rule” just sounds scarier than it is. What matters is how much impact it has relative to your retirement benefit. Once you know that, it stops being this looming abstract thing and turns into a number. And the number, at least for me, was small.

If you’ve got iDeCo and haven’t run the exit simulation yet — do it. It’s probably less scary than you think.

This article reflects personal experience and is for informational purposes only — not investment advice. All investment decisions are your own responsibility.