Break-Even for Delaying or Claiming Japan's Pension Early: Which Starting Age Pays Off?

Early claiming cuts 0.4% a month, delaying adds 0.7% a month

The old-age pension normally starts at 65, but you can bring it forward to as early as 60 (early claiming) or push it back to as late as 75 (delayed claiming). The change is set month by month, and once set, the rate lasts for life.

• Early claiming: 0.4% less for each month before 65 (0.5% less if born on or before April 1, 1962). Starting at 60 means 24% less
• Delayed claiming: 0.7% more for each month after 65. Starting at 70 means 42% more, and at 75 means 84% more
• You can't request a delay until age 66 or later (you can't choose to start between 65 and 65 years 11 months with an increase)

If you'd get 150,000 yen a month at 65, that's 114,000 yen a month from 60, 213,000 yen from 70 and 276,000 yen from 75. You can't change the rate once you start, so you need to think through your living costs and health before choosing.

Rates and break-even points by starting age

The break-even point is the age when your cumulative total matches what you'd have received starting at 65. If you delay, you come out ahead by living past it. If you claim early, you come out ahead by dying before it. Here's the example of someone who'd get 150,000 yen a month at 65.

For delayed claiming, break-even falls 11 years and 11 months after you start, whichever age you choose. For early claiming, it falls 20 years and 10 months after you start. Since the rates are the same for large and small pensions, the break-even doesn't change with your amount. If you were born on or before April 1, 1962 and your rate is 0.5%, claiming at 60 means 30% less, and the break-even moves up to 76 years and 8 months.

Cumulative totals at 5 million yen for 38 years

For someone who'd receive 1,889,051 yen a year (157,420 yen a month) at 65, these are the monthly amounts at different starting ages and the cumulative totals received by each age.

Among these five, the cumulative total is highest for someone starting at 60 by age 80, starting at 70 by age 85, and starting at 75 by age 95. Living to 90, starting at 70 brings in about 6.4 million yen more than starting at 65. On the other hand, if you start at 75 and die at 85, you'll have received about 3 million yen less than starting at 65.

Don't decide on the break-even point alone

• Taxes and social insurance: a larger pension raises income tax, resident tax, national health insurance and long-term care insurance premiums, so on a take-home basis the break-even moves 1 to several years later
• Spouse supplement: if you have a younger spouse and qualify for the supplement, delaying your employees' pension means you don't get the supplement while you wait, and it isn't increased afterward. See the spouse supplement article for details
• Pension for working seniors: the part of your employees' pension suspended because you keep working past 65 doesn't grow if you delay
• Early claiming can't be undone: once you request it, you can't cancel it, and you lose access to the basic disability pension and the widow's pension. You also can no longer make voluntary national pension enrollment or catch-up payments
• Early claiming covers both pensions at once: you must claim the basic and employees' pensions early together. Delaying can be done for just one of them

If you die while delaying, your family can claim the unpaid pension at the age-65 amount, but they don't receive the increase. Also, if after age 70 you decide to stop delaying and take your pension back to age 65 as a lump sum, a special rule treats you as having requested the delay 5 years earlier.

How to decide when to start

1. 1

   Find your pension amount at 65

   Enter your birth date, enrollment period and average income in the Pension Amount Calculator and check your annual amount from 65. Estimates by income are in the table by income and years enrolled.

2. 2

   Look at the comparison table and cumulative chart for 60 to 75

   Changing the starting age shows the monthly amount, break-even and cumulative totals at ages 80 to 100 side by side. If you have a spouse supplement, you can compare with that included.

3. 3

   Set your living costs from 65 against your income

   Check your income while you keep working and how many years severance and savings can cover. The severance tax table shows what you'd take home from severance.

4. 4

   Think about the basic and employees' pensions separately

   Since you can delay just one, you can choose a combination such as taking the employees' pension from 65 and delaying only the basic pension until 70.

FAQ

If I delay my pension to 70, at what age do I break even?

At 81 years and 11 months. Your monthly amount from 70 is 42% higher than from 65, and by 81 years and 11 months you've made up the 5 years you went without. For delayed claiming, break-even is 11 years and 11 months after you start, whichever age you choose.

If I claim at 60, past what age do I lose out?

If you were born on or after April 2, 1962, claiming at 60 cuts your pension by 24%, and living past 80 years and 10 months leaves you with less in total than starting at 65. If you were born on or before April 1, 1962, the cut is 30% and the break-even is 76 years and 8 months.

From what age can I delay my pension?

You can request a delay from age 66, month by month, up to 75. There's no option to start with an increase between 65 and 66, so the first step is an 8.4% increase at 66 years and 0 months.

Does delaying also raise my taxes and premiums?

Yes. A larger pension raises income tax, resident tax, national health insurance and long-term care insurance premiums, so on a take-home basis the increase is less than 42% and the break-even comes later. It varies with your municipality and other income.