iDeCo vs NISA: Japan's Best Retirement Investment Accounts Compared
Every working Japanese resident has two of the most generous investing wrappers in Asia sitting side by side: NISA, which shelters growth for life with no lockup, and iDeCo, which deducts every contribution from your taxable income but freezes the money until age 60. Here is how the two actually compare in 2026, when to use each, and how most salaried employees should split contributions between them.
What each account actually is
NISA (Nippon Individual Savings Account) is a personal investment account where dividends, distributions and capital gains grow entirely free of Japanese income and capital gains tax. Since the 2024 reform it is permanent, contribution room is much larger, and there is no holding-period cliff.
iDeCo (Individual-type Defined Contribution pension plan) is a private retirement account. Contributions are deducted from your taxable income the year you make them, growth is tax-deferred, and withdrawals from age 60 are taxed under Japan's retirement or public-pension income rules (both of which come with sizable deductions of their own).
Contribution limits at a glance
NISA has a single set of caps that applies to everyone. iDeCo caps depend on your employment status and whether your employer already offers a corporate pension.
| Account | Annual room | Lifetime cap | Access before 60 |
|---|---|---|---|
| NISA (combined) | ¥3,600,000 | ¥18,000,000 principal | Yes, sell anytime |
| NISA - Tsumitate quota | ¥1,200,000 | Shares the ¥18M cap | Yes |
| NISA - Growth quota | ¥2,400,000 | ¥12M sub-cap inside ¥18M | Yes |
| iDeCo - self-employed (Cat. 1) | ¥816,000 (¥68k/mo) | None (bounded by years to 60) | No |
| iDeCo - employee, no corporate pension | ¥276,000 (¥23k/mo) | None | No |
| iDeCo - employee with corporate DC/DB | ¥240,000 (¥20k/mo) | None | No |
| iDeCo - public servant | ¥240,000 (¥20k/mo) | None | No |
| iDeCo - Category 3 (dependent spouse) | ¥276,000 (¥23k/mo) | None | No |
How the tax break actually works
Both wrappers save tax, but at different points in your career. Here is the same ¥600,000 annual contribution run through each account for a Tokyo employee in the 20 percent marginal national bracket (plus 10 percent resident tax, so 30 percent combined).
| Metric | NISA | iDeCo |
|---|---|---|
| Contribution | ¥600,000 | ¥600,000 |
| Income tax deduction this year | ¥0 | ¥180,000 (30% × 600k) |
| Tax on dividends and gains | ¥0 forever | ¥0 during the wrap |
| Tax at withdrawal | ¥0 | Retirement-income or pension-income rules |
| Access to principal | Any time | Age 60 (min 10 years contributions) |
| Contribution recycles? | Yes, principal returns to lifetime room | No |
The ¥180,000 iDeCo deduction is not theoretical. It shows up as a smaller withholding on your next year's residence tax bill and, if you file a nenmatsu chosei year-end adjustment, as a refund in December or January.
What you can hold inside each
NISA (Growth quota)
- Japanese and foreign stocks
- ETFs, REITs, mutual funds
- US-listed ETFs at brokers that support them (SBI, Rakuten, Monex)
- Leverage / margin: not allowed
- Bonds: individual bonds not allowed
iDeCo
- Approved mutual funds (typically 20-40 per broker)
- Insurance-type principal-guaranteed products
- Deposit-type products
- No individual stocks or ETFs
- Fund menu is fixed by the plan administrator
Because iDeCo restricts you to a curated fund list, the low-cost broker you pick matters a lot. SBI Securities, Rakuten Securities and Monex all offer eMAXIS Slim and other ultra-low-cost passive funds inside their iDeCo menus with no account maintenance fee.
Fees you actually pay
| Fee | NISA | iDeCo |
|---|---|---|
| Broker account fee | ¥0 at SBI / Rakuten / Monex | ¥0 at SBI / Rakuten / Monex; up to ¥400/mo elsewhere |
| National Pension Federation fee | - | ¥105 / month (mandatory, everyone) |
| Trust bank custody fee | - | ¥66 / month (mandatory, everyone) |
| Setup fee | ¥0 | ¥2,829 one-time |
| Fund expense ratios | Whatever you buy | Whatever you buy |
Every iDeCo account costs at least ¥171 per month in administrative fees no matter how little you contribute, which is why iDeCo is a poor fit for very small contributions. Below roughly ¥5,000 per month, the fixed fees swamp the tax benefit for a mid-bracket taxpayer.
When NISA is the better first stop
- You are under 30 and might buy a home, change careers, or leave Japan in the next 10 years
- You have no other emergency reserve and want the option to pull the money in a crunch
- Your marginal tax rate is 5 to 10 percent (very low income; the iDeCo deduction is worth almost nothing)
- You want to hold individual stocks or foreign ETFs (iDeCo cannot)
- You already have a company pension that fills much of your retirement need
When iDeCo pays off more
- You are 40 or older with a stable income and stable plan to stay in Japan through retirement
- Your marginal tax rate is 20 percent or higher (the deduction is real money now)
- You have no employer pension and iDeCo is your primary retirement vehicle
- You have already maxed the annual ¥3.6M NISA room and want more shelter
- You value forced discipline (money you literally cannot touch until 60)
The salaried-employee split most people should copy
DEFAULT ALLOCATION
- Step 1: Build a 3-6 month emergency fund in a regular savings account first. Neither NISA nor iDeCo should hold your rent buffer.
- Step 2: Contribute up to your full iDeCo cap (¥20-23k per month for most employees). The income-tax deduction is your risk-free 20-30 percent return.
- Step 3: Direct anything left to the Tsumitate NISA quota via monthly automatic buys of a global equity index fund (eMAXIS Slim All Country, Rakuten VT, or similar).
- Step 4: If you still have room, use the Growth NISA quota for lump sums (bonus, side-income) into the same funds.
- Step 5: Only after both wrappers are full does taxable investing (tokutei koza) start to make sense.
Withdrawals: the trap nobody warns you about
NISA is simple: sell whenever you like, principal returns to your lifetime room the following January, gains are tax-free.
iDeCo is more complicated. You choose from three withdrawal styles from age 60 onward: lump sum, annuity (5 to 20 years), or a mix. Each has its own tax formula.
| Withdrawal style | Tax treatment | Best for |
|---|---|---|
| Lump sum | Retirement income deduction (¥400k × years contributed, up to 20 years; ¥700k × years after) | Long contribution history and no other lump-sum retirement payout |
| Annuity | Public pension income deduction (~¥1.1M/year tax-free at 65+) | You will draw down slowly across your 60s and 70s |
| Lump sum + annuity mix | Both deductions apply, taken in different years | Coordinating with company severance payment |
Choosing a broker
Both NISA and iDeCo let you pick any provider - it does not have to be your salary bank. The broker choice matters more for iDeCo because switching later is slow and paper-heavy.
SBI Securities
- Largest iDeCo fund menu, ~40 funds
- No account maintenance fee
- US-listed ETFs available inside NISA
- Interface: Japanese only
Rakuten Securities
- Rakuten Point rebates on trades
- No account maintenance fee
- Good English-language docs
- Rakuten VT / VTI funds in menu
Monex
- Cleanest UI of the three
- No account maintenance fee
- Broad US stock catalogue inside NISA
- Smaller iDeCo fund menu
Common mistakes
- Assuming you have to pick just one - most residents should use both
- Opening iDeCo at your salary bank (Mizuho, MUFG, SMBC) instead of a discount broker, adding ¥300-400/month of unnecessary fees
- Buying a target-date fund inside iDeCo when a cheaper global-equity index fund does the same job for a fraction of the expense ratio
- Forgetting to file the nenmatsu chosei paperwork and losing the iDeCo tax deduction for that year
- Selling NISA holdings in December to "reset" the lifetime cap - room only comes back the following calendar year
Frequently asked questions
Can I contribute to both NISA and iDeCo in the same year?
Yes. They are separate wrappers with separate caps. Most Japanese employees should aim to use both: iDeCo up to the monthly cap for the income tax deduction, then NISA for anything above that.
What is the total tax-advantaged room for a salaried employee in 2026?
Roughly ¥3.876 million per year: ¥3.6M in the NISA annual room plus ¥276k in iDeCo for an employee with no corporate pension (¥240k if you have a DB or DC plan at work). Room in iDeCo is truly annual and cannot be carried forward; NISA room does carry across years up to the ¥18M lifetime cap.
Which should I fund first, NISA or iDeCo?
For most working residents with a marginal tax rate of 20 percent or more, fund iDeCo to the cap first because the income tax deduction is a guaranteed, risk-free return in year one. Direct any additional savings to Tsumitate NISA. If your marginal rate is under 15 percent or you might need the money before 60, invert the order and prioritise NISA.
Can I access iDeCo money before age 60?
Only in very narrow cases: severe disability, or your beneficiary if you pass away. There is no penalty-withdrawal option like a US 401(k). If job security, home purchase, or a move overseas are real possibilities, use NISA instead.
What happens to NISA and iDeCo if I leave Japan?
NISA is normally frozen or closed depending on the broker; existing holdings can usually stay until sold, but no new contributions. iDeCo contributions must stop, though the balance keeps growing tax-deferred inside the wrap until you reach age 60 and choose a withdrawal method. Non-residents cannot withdraw early either way.
Do I pay tax on iDeCo dividends inside the account?
No. Dividends, distributions and capital gains all grow tax-deferred inside iDeCo. Japanese tax only applies at withdrawal, and even then it is heavily reduced by the retirement income deduction or the public pension deduction depending on how you take the money out.