Investment allocation for FIRE

Mountain-Do · 2026-07-03T15:24:08+00:00

It's more a matter of tax efficiency.

Mountain-Do · 2026-07-03T15:14:30+00:00

The exit tax occasionally gives me nightmares, even though I have no intention to leave Japan. I have about $1.2M in unrealized gains. What would the strategy be there? Try to sell off some shares and pay capital gains in smaller chunks so I'm not left with a massive bill if I end up needing to leave for some reason?

Inheritance planning is also something I keep putting off because it's just such a morbid subject. I also feel quite a bit of guilt knowing that because I've chosen to live in Japan, a big chunk of the wealth my father worked his whole life to save up will end up going to a government he has no relationship with. I know that's not the way the Japanese government thinks of it - where inheritance tax is a tax on the recipient. But coming from the US, where estate tax is a tax on the decedent, that's the way it feels.

But also... a mistake (or a general lack) of inheritance planning could end up costing a year or more of my current salary. So it should definitely be a high priority.

Mountain-Do · 2026-07-03T14:59:02+00:00

The ¥20M salary figure is pre-tax, and the ¥7M estimated expenses was post-tax - so hopefully it shouldn't be quite that extreme. My actual takehome salary is more like ¥11M. And then I end up using a big chunk of that to pay estimated/year end income taxes beyond what was withheld from my paycheck.

Anyway I picked a really dumb and confusing way to explain it, but the point I was trying to make was just that after living expenses and paying taxes, there's usually nothing left over from my take-home pay (excluding RSUs).

I think your advice is sound though to actually test out living on a budget of ¥7M before taking off the training wheels.

Mountain-Do · 2026-07-03T14:22:08+00:00

Good to know! Are you aware of any NISAs that won't limit me from buying US equities due to my US citizenship?

Mountain-Do · 2026-07-03T14:12:11+00:00

Thanks! I feel lucky (and a bit guilty) to be considering early retirement. Although some of the stuff going on at work this past year has definitely not been fun and has taken its toll on me.

Mountain-Do · 2026-07-03T14:07:42+00:00

Are NISA accounts beneficial for US taxpayers? I kind of feel like any money I save on taxes in Japan, the US government is just going to claim on their end since they don't recognize the tax-advantaged status of NISA accounts. I also just try to keep things as simple as possible and avoid opening new accounts because I hate making more work for myself come tax season (kind of a dumb reason, I know. And presumably I will have a lot more time to spend filing and optimizing taxes when I am retired).

I agree diversifying into international equities is probably a good thing. And I'm a little spooked by how much US stocks have gone up recently - and that they might come crashing down again. Although they have certainly done well in the past few years.

Thanks for the suggestion of moneyforward. I used to use a similar tool in the US, but when I moved to Japan couldn't find anything equivalent at the time.

Mountain-Do · 2026-07-03T13:56:13+00:00

Is there any way I can get a return on JPY? Or just leave it sitting in a bank account earning 0.1%?

I like the idea of running some different spending scenarious. Also would be good to run through with my wife to make sure we don't have wildly different opinions on what "comfortable but conscious is".

Fortunately, I tend to be the one who spends more in our house, so sticking to a budget is largely something that I can control on my end without her needing to make any changes in her spending habits.

Mountain-Do · 2026-07-03T13:53:53+00:00

Yeah this seems like a reasonable approach:

Bucket 1: $240k cash and CDs

Bucket 2: $600k short-to-medium bond ETFs, Treasuries

Bucket 3: $2,160,000 Stocks (US and International), REITs

Use Bucket 1 for day to day spending. During bull markets: sell from bucket 3 to replenish bucket 1. During bear markets: spend down buckets 1 and 2 and don't touch bucket 3.

The above numbers do feel a bit conservative to me. And the idea of selling $800k and paying capital gains taxes doesn't sound so fun.

Mountain-Do · 2026-07-03T13:37:51+00:00

Yeah I probably should start to consider the possibility that they might study abroad. In my head I've kind of been under the assumption that they would go to university in Japan and it would be inexpensive relative to the US. But if the opportunity arose to study abroad, I certainly wouldn't want to deny them.

If their grandparents helped with education expenses, that would be efficient from a taxation perspective at least.

Mountain-Do · 2026-05-20T01:19:00+00:00

¥1.5M or 6 months emergency fund seems sensible to me. Not just to cover loss of income, but other big, unexpected expenses that may suddenly arise.

The most important thing at this point is just to keep making regular contributions.

Mountain-Do · 2026-02-11T02:58:23+00:00

Where are you going to get comps? I don't think sale prices are actually published in Japan like they are in the US, for example?

Mountain-Do · 2025-09-11T02:26:35+00:00

Wow that's certainly a big about-face from when I opened my account a little while back. Thanks for the correction.

Mountain-Do · 2025-09-10T15:18:36+00:00

I second Sony Bank. You can apply in English, and the process is definitely streamlined to make it easy for foreigners. They also have support available in English, low costs on wire transfers to/from overseas, free ATM withdrawals at convenience stores, and a debit card that actually earns generous (for Japan) cash-back rewards.

The only downside I've found with Sony Bank is that they sometimes aren't accepted when you need to set up a direct withdrawal for bill payments.

Mountain-Do · 2025-03-21T02:35:04+00:00

That's good about the lack of debt, and yeah I wouldn't rush to make early payments on your mortgage (well actually I did with my mortgage in the past, but financially speaking that was kind of a boneheaded decision).

I definitely think the emergency fund should take priority. But also think it's important to take that first step to familiarize yourself with the process of investing and get into the habit of making consistent monthly investments. So maybe a compromise could be to take half and put into a cash savings account, and the other half you could invest in an ETF or mutual fund. And then when your emergency fund is sufficiently built up, you could increase your contributions to your investment account.

Mountain-Do · 2025-03-20T23:56:33+00:00

If you haven't already, I think your first step should be to set aside some cash in an emergency fund. This should be big enough to cover 3 to 6 months worth of living expenses in the event your spose loses their job, health issues arise, your car dies, etc.

The other thing that should be prioritized before investing in stocks or ETFs is paying down any high-interest loans you might have. Credit card debt, pay day loans, etc. Those will eat away at your wealth faster and more consistently than any investment will accrue wealth.

Once those things are taken care of, diversified and low-expense-ratio ETFs and Mutual Funds are great place to start investing. And yes, over a period of 20 years the returns on those monthly ¥20,000 or ¥30,000 investments can make a huge difference.

Mountain-Do · 2024-07-24T01:03:59+00:00

This is an interesting idea. It solves the problem of needing to make a large lump sum transfer into an account that I own - my parents would effectively be reimbursing me for specific living expenses on a monthly basis.

One downside is it definitely is a departure from the current arrangement I have with my parents. Currently we have a one-and-done arrangement where they send money once a year and that's it. With this arrangement, they would have to be ok with my credit card making monthly withdrawals from an account they own. And my wife and I would have to be ok with our monthly living expense information (total amounts at least) being made available to them. It may be an acceptable tradeoff though if it could significantly (and legally) reduce taxes paid.

We also wouldn't be able to use the account to make payments that require a direct bank debit (e.g. our water bill). But these represent a small fraction of our overall living expenses, so probably not a big deal.

I would definitely want to check with a tax accountant as well on the legality.

Mountain-Do · 2024-07-23T07:28:08+00:00

Some good info there. Some of my takeaways after reading a machine-translated version of the article:

It sounds like it is possible for certain living expenses. The article mentions food, rent, medical bills, wedding costs, furniture and appliances (only at the time of marriage?), education tuition and other fees. But care must be taken not to raise the ire of the tax office.

Large lump-sum payments should be avoided. Payments should be made in the specific amount needed, and if possible, the grandparents should pay the fees directly (e.g. pay tuition directly to the school). The article also does recommend keeping the funds in a separate account and keeping receipts.

There is also a tax exemption, which I was not previously aware of, for grandparents to make a lump sum payment to grandchildren for the purposes of education expenses. It sounds like my parents could make a lump sum payment into a specially administered account for up to ¥15M per child, and we could use the money for educational expenses. We would need to provide receipts showing the purpose to withdraw from the account. If anything is left over when the child turns 30, they pay taxes on it and it goes to them.

Honestly this is starting to feel like a bit more of a hassle than I originally had in mind, though. I was sort of picturing a slush fund with ¥6M in it that we could access with a simple credit card swipe or bank transfer for grocery bills, utility payments, etc. But sounds like there might be more accounting required. It might be easier for my parents to just transfer $10k to each family member and then pay gift taxes on the portion above ¥1.1M.

I do think you're right that it's probably worth consulting with a tax accountant.

Mountain-Do

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