- July 29, 2026
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Many foreign residents in Japan have heard the phrase “the 20 million yen retirement problem” at least once. This figure made headlines across Japan back in 2019, but does it actually hold true for foreign residents building retirement savings in Japan?
In reality, how much a foreign resident needs for retirement varies significantly from person to person. The 20 million yen figure is simply an average benchmark calculated for Japanese nationals. Variables that don’t apply to Japanese citizens — a pension from your home country, currency exchange risk, and the possibility of eventually returning home — can dramatically change how much you actually need.
In this article, we’ll walk you through the truth behind the 20 million yen problem, the variables unique to foreign residents, how much you might need based on your lifestyle, and an action plan you can start on today.
This article is supervised by Masamichi Takayanagi, a certified financial planner. If you haven’t yet worked out your estimated pension amount, we recommend starting with our Japan Pension Estimate guide first — it will make the calculations in this article much easier to follow.
About the Supervisor & Writer
Masamichi Takayanagi
Financial Planner & columnist;
An independent financial planner with extensive experience as a financial columnist, specializing in a wide range of topics including asset management, life insurance, inheritance, loan products, and credit cards. Over 1,000 articles and projects have been contributed to the field.
1st grade Certified Skilled Professional of Financial Planning, Certified Financial Planner®.
Table of Contents
Chapter 1: The "20 Million Yen Problem": Does It Apply to Foreign Residents?
We wouldn’t recommend using the 20 million yen figure as your own retirement target as a foreign resident. This number comes from a report titled “Asset Formation and Management in an Aging Society,” published by the Financial Services Agency’s Financial System Council in June 2019.
The calculation behind it is simple: it assumes an elderly couple with no employment income runs a monthly deficit of around 50,000 yen, then multiplies that shortfall over 30 years.
Built into this estimate are assumptions specific to Japanese nationals — a married couple, homeownership, and a standard Employees’ Pension Insurance payout based on average income.
Many foreign residents have fewer years of pension contributions, lower rates of homeownership, and in some cases continue sending money back to their home country — meaning these assumptions may not apply in the same way. This is exactly why it’s worth setting the 20 million yen figure aside and calculating a target that reflects your own situation instead.
Source; Financial Services Agency, Financial System Council, “Asset Formation and Management in an Aging Society”, June 3, 2019.
Chapter2: Variables That Change Everything for Foreign Residents
The variables that shape retirement savings in Japan for foreign residents include:
- Whether you stay in Japan or return to your home country
- Whether you have a pension from your home country
- How you think about currency risk
- Whether you own or rent in retirement
Each of these variables can shift your target amount by several million yen, so it’s worth working through the ones that apply to you first.
Will You Stay in Japan or Return Home?
Whether you stay in Japan or return to your home country is the first major fork in the road that reshapes your target amount from the ground up. Continuing to live in Japan, where the cost of living is high, versus returning to a home country with a lower cost of living can mean very different savings targets — even for the same standard of living.
The average monthly spending for a single elderly person in Japan is roughly 150,000–170,000 yen. If your home country’s cost of living is about half that of Japan, your target amount would move closer to half as well. That said, if you return home, you’ll typically receive your Japanese pension into an overseas account, which adds currency risk into the mix.
Deciding, even tentatively, which country you’ll spend your retirement in before running your calculations will make the planning process much easier.
Source: Statistics Bureau of Japan, “Family Income and Expenditure Survey — 2025 Summary Report”, 2026.
Do You Have a Pension from Your Home Country?
It’s worth thinking about your retirement income as the combination of your Japanese pension and any pension from your home country, rather than the Japanese pension alone. If you’re from a country that has a social security agreement with Japan, your years of contributions in both countries may be combined to help you meet the eligibility requirements.
For example, even if you have less than 10 years of contributions in Japan, combining that with your home-country contributions may bring you past the 10-year mark, opening the door to receiving Japan’s old-age pension. On the other hand, if you’re from a country without such an agreement, or from a developing country with limited public pension infrastructure, you’ll need to rely more heavily on your own savings.
For more detail on totalization and social security agreements, see our article on Pension.
Source; Ministry of Health, Labour and Welfare, “Social Security Agreements”, accessed July 2026.
Currency Risk: The Hidden Threat to Your Retirement
Currency fluctuations are a quiet but significant hidden threat to a foreign resident’s retirement savings. Someone holding $10,000 in assets when the exchange rate was 110 yen to the dollar had the equivalent of 1.1 million yen. If the yen weakens to 155 to the dollar, that same $10,000 grows to the equivalent of 1.55 million yen.
Conversely, someone holding 1 million yen in yen alone would see its value drop by roughly 30% when measured in dollar terms. Holding only yen leaves you exposed when the yen weakens, while holding only foreign currency leaves you exposed when the yen strengthens — so it makes sense to think about an allocation that accounts for both risks.
Balancing assets between your home currency and the yen can help cushion the impact regardless of which way the exchange rate moves.
Will You Own or Rent in Retirement?
When it comes to housing in retirement, it’s important to plan early for the particular difficulty foreign residents can face renting as they age. Surveys show that roughly 80% of landlords are reluctant to rent to elderly tenants, and securing a guarantor can be a significant hurdle for single elderly renters.
Cases of being turned down for housing simply because of foreign nationality are still common, and the difficulty is compounded by language barriers and guarantor company screening. Owning a home reduces the uncertainty around rental screening, but comes with ongoing costs such as property tax and maintenance expenses.
For a detailed breakdown of these costs, see our Property Tax article. Whether to buy a home when there’s a chance you might eventually return to your home country is a dilemma unique to foreign residents.
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Chapter 3: How Much Do You Actually Need? Scenarios by Lifestyle
Let’s run the numbers on three different lifestyles to see how much foreign residents in Japan might actually need for retirement.
Scenario A — Modest Retirement in a Regional City
For a modest retirement in a regional city, roughly 10 million yen in personal savings is a reasonable benchmark. The average monthly spending for a single elderly person is around 150,000–170,000 yen, and choosing a regional city with lower rent can bring that down further.
Assuming your pension covers part of your expenses, a monthly shortfall of 30,000 yen sustained over 30 years works out to about 10 million yen. Adding a buffer of around 2 million yen for unexpected medical or housing costs will give you more peace of mind. It may not be a glamorous lifestyle, but for a modest, steady standard of living, this level is well within reach.
Scenario B — Comfortable Retirement in a Major City
For a comfortable retirement in a major city, 20–30 million yen is a more realistic target. Surveys show that a comfortable retirement lifestyle costs a couple around 391,000 yen per month, and that figure climbs further once you factor in city-center rent.
If your pension leaves a monthly gap of around 100,000 yen, that adds up to over 30 million yen drawn down across 30 years. If you want the freedom to enjoy hobbies, travel, and socializing, building up savings early is essential. The convenience of city living comes with a correspondingly higher price tag.
Scenario C — Split Retirement Between Japan and Your Home Country
Here we’ll model a single person retiring at 65 and living 30 years to age 95, splitting time evenly between Japan and their home country — six months in each — with home-country living costs assumed at half of Japan’s, and housing maintained in both countries.
Based on the roughly 150,000–170,000 yen average monthly spending for a single elderly household, we’ll use 170,000 yen as our base figure here. For the six months in Japan, we’ll use the full 170,000 yen; for the six months abroad, we’ll subtract 50,000 yen in food costs, bringing it to 120,000 yen. That puts annual costs in Japan at 1.74 million yen.
Living costs abroad, at half of Japan’s rate, come to 85,000 yen, with maintenance costs also halved at 60,000 yen — bringing total overseas living costs to 870,000 yen.
Adding estimated travel costs and medical/contingency costs, annual spending comes to roughly 3 million yen.
- Japan living and maintenance costs: approx. 1.74 million yen
- Home-country living costs: approx. 870,000 yen
- Travel costs: approx. 200,000 yen
- Medical/contingency costs: approx. 200,000 yen
Total annual spending: approx. 3.01 million yen
(Rounded to 3 million yen for the calculations below.)
Since your pension income changes the amount you’ll actually need, let’s compare two cases:
- Case 1 (Employees’ Pension: 1.8 million yen/year assumed): Shortfall of approx. 1.2 million yen/year → approx. 36 million yen over 30 years
- Case 2 (National Pension only: 720,000 yen/year): Shortfall of approx. 2.3 million yen/year → approx. 69 million yen over 30 years
Source; Ministry of Health, Labour and Welfare, “Status of Employees’ Pension Insurance and National Pension Programs, FY2024”, Table 20, December 2025.
Chapter 4: How to Build Your Retirement Fund in Japan
This chapter covers how foreign residents in Japan can go about building their retirement savings.
NISA and iDeCo: Your Two Best Tools
When it comes to building retirement savings, NISA and iDeCo — Japan’s two tax-advantaged savings systems — can be your most reliable tools. As a rule of thumb, choose NISA if flexibility and the ability to withdraw at any time matter most to you, and choose iDeCo if you want funds you won’t touch until retirement along with tax savings.
With NISA, investment gains are tax-free and funds can be withdrawn at any time, making it easier to handle a return home or unexpected expenses. iDeCo, on the other hand, lets you deduct your full contribution amount from your taxable income — reducing your income tax and residence tax every year — but in principle, you can’t withdraw the funds until age 60. If your goal is retirement savings, a workable approach is to build your foundation with iDeCo and use NISA more flexibly with whatever you have left over.
The first thing foreign residents should understand is how their NISA account is treated when they leave Japan. Once you become a non-resident of Japan, you can no longer make new investments through the account, and even if you complete the required procedures for an unavoidable reason such as a job transfer, continued holding is limited to a maximum of five years.
iDeCo’s eligibility requirements for receiving benefits also need attention. In principle, payouts begin at age 60 or later, and if you have less than 10 years of enrollment, the start of your payout is pushed back further. The requirements for a lump-sum withdrawal refund are strict, and moving abroad alone is generally not enough to qualify for cancellation. Since how accounts are handled after returning home varies by financial institution, it’s worth confirming the details before you leave Japan. For a more detailed comparison of the two, see our existing guide.
Emergency Fund vs Retirement Fund: What Comes First?
As a general rule, the right order is to build your emergency fund first, then move on to retirement savings. Start by setting aside six months’ worth of living expenses as a foundation in case of unemployment or illness. Once that foundation is in place, you can start directing your monthly surplus toward NISA and iDeCo to grow your retirement fund.
For foreign residents, it’s also worth keeping a separate fund specifically for the cost of returning home, apart from your emergency fund. Keeping these two “wallets” separate helps avoid confusing a sudden return home with your everyday safety net.
What If You Started Late?
Even if you’re behind on preparation, it’s not too late — there’s still plenty you can do starting in your 40s or 50s. Since you’ll have less time to let your investments grow, it helps to shift toward a more conservative allocation rather than leaning heavily into volatile assets.
Working longer and delaying when you start receiving your pension can also increase your monthly payout amount. Combining a review of your spending with securing additional income can help you steadily close the gap, even with a late start. Rather than rushing into high-risk options, switching to a disciplined, steady strategy tends to pay off in the end.
Chapter5: Healthcare Costs in Retirement: What Foreign Residents Should Budget For
Healthcare costs in retirement become easier to estimate once you understand how your out-of-pocket share changes with age. Under National Health Insurance and the Late-Stage Elderly Healthcare System, the out-of-pocket share you pay at the counter is generally set as follows, based on age:
- Under 70: 30%
- 70–74: 20%
- 75 and over: 10%
If your income is comparable to that of a working-age person, your share stays at 30% regardless of age, and even at 75 or older, a certain income level raises your share back up to 20%. Long-term care insurance enrollment is mandatory from age 40: between ages 40 and 64 you pay premiums alongside your health insurance, and from age 65 onward, premiums are generally deducted directly from your pension. Since English-speaking medical facilities tend to be concentrated in urban areas, it’s worth factoring healthcare access into where you choose to live.
It’s also worth considering whether private medical insurance makes sense to cover costs that public insurance doesn’t, such as fees for a private hospital room.
Chapter6: FAQ on Retirement Savings in Japan
Q. What age should you start preparing retirement savings? How does the strategy differ between your 30s and 40s?
The short answer is that the earlier you start, the better — the best time to begin is now, whenever that thought first crosses your mind. The longer your investment horizon, the more compound growth works in your favor, allowing even small amounts to grow significantly.
In your 30s, time is your greatest asset, making a long-term strategy centered on volatile assets — combined with regular contributions and diversification — a good fit. In your 40s, with a shorter investment horizon, a more realistic approach is to keep growing your assets while also reviewing your spending and shifting toward a more conservative allocation.
Whichever decade you’re in, it’s never too late — the important thing is to start small.
Q. How much should you set aside each month to be ready for retirement? What percentage of income is a reasonable benchmark?
A reasonable benchmark for your monthly contribution is 10–20% of your take-home pay — an amount you can sustain without straining your budget. The key is to first understand your household’s surplus, then set an amount that won’t put pressure on your daily life.
The amount matters less than whether you can keep it up consistently over the long term.
Q. Can you live on Japan’s pension alone? How should you balance your pension and personal savings?
Whether you can live on Japan’s pension alone depends heavily on your years of contributions and payout amount, but in most cases, the pension alone isn’t enough. The average National Pension payout is around 60,000 yen per month for a single person, which falls short of the roughly 150,000 yen average monthly spending for a single elderly person.
Longer enrollment in Employees’ Pension Insurance raises your payout, but foreign residents tend to have fewer years of contributions, so it’s worth factoring in any pension from your home country as well. A realistic approach is to cover the shortfall your pension doesn’t reach by drawing down assets you’ve built through NISA and iDeCo. Start by working out your estimated pension amount, then set your savings target by working backward from the shortfall.
Chapter7: Summary
The 20 million yen problem is simply an average benchmark calculated for Japanese nationals — how much you actually need for retirement savings in Japan as a foreign resident depends heavily on your own personal variables. Whether you stay in Japan or return home, whether you have a pension from your home country, how you diversify against currency risk, and what you decide about housing can all shift your target amount by several million yen.
What matters most is starting by working out your estimated pension amount, then calculating your target based on your own scenario. From there, secure both an emergency fund and a fund for returning home, and build up your savings steadily through NISA and iDeCo. Even if you’re behind on preparation, switching strategies can still get you there in time — so take that first step today, however small.
*This article is provided for general informational purposes only and does not constitute individual financial or legal advice. The figures shown here are estimates based on the sources cited and will vary depending on your income, pension contribution history, living situation, and exchange rate fluctuations. Information is accurate as of July 2026. Pension eligibility, tax treatment, and NISA/iDeCo rules differ case by case, so please confirm with a certified financial planner, the relevant government agency, or a qualified professional before acting on any information in this article.
