Estimating the Income You Need After Retirement
Post-retirement living expenses are often said to be 70-80% of working-age expenses, but in practice individual variation is large. According to Japan's Ministry of Internal Affairs and Communications Household Survey (2024 average), consumption expenditure for a non-working couple-only household with a husband aged 65 or over and a wife aged 60 or over averages about 26 man-yen per month. Adding increased medical costs, home maintenance, and hobby and travel expenses, a comfortable retirement is said to require 35-38 man-yen per month. Meanwhile, the average combined public pension for a married couple is about 22-25 man-yen per month, leaving a monthly shortfall of 10-15 man-yen.
To cover this shortfall for 30 years (age 65 to 95), the calculation comes to 3,600-5,400 man-yen in assets. The so-called "20 million yen retirement problem" is a bare-minimum estimate; for a comfortable life, 4,000-5,000 man-yen is sometimes cited as a benchmark, but that figure rests on a specific set of assumptions, and the amount you need changes with your standard of living, your pension, and the number of years you plan for. If you have a retirement lump sum, you can subtract that, but the amount varies widely by company size, years of service, and whether a retirement benefit plan exists at all - some employers have none. Check your own employer's rules for your expected amount before running the numbers.
Designing a Three-Pillar Income Structure
Post-retirement income should be designed around three pillars: public pension, dividend and interest income, and asset drawdowns. Under the rules in place as of 2026, if you choose to defer your public pension (up to age 75), it increases by 0.7% per month of deferral - deferring to age 70 yields a 42% increase, and to age 75 an 84% increase. A pension of 15 man-yen per month at age 65 would grow to about 21.3 man-yen if deferred to age 70, making deferral a compelling option if you can cover living expenses from age 65 to 70 with other income sources.
Dividend income can generate stable cash flow by combining high-dividend stocks and REITs. However, since dividends carry the risk of being cut, diversifying across multiple stocks and sectors is important.
Determining the Optimal Pace of Asset Drawdowns
For asset drawdowns, the "4% rule" is widely known. This method involves withdrawing 4% of your assets at retirement in the first year, then adjusting the withdrawal amount for inflation in subsequent years. The idea comes from the "Trinity Study," published in 1998 by researchers at Trinity University in the U.S.: using U.S. market data from 1926 to 1995 for a portfolio of 50% stocks and 50% bonds, the original analysis found that assets survived the full 30 years in more than 90% of the periods examined. That share is not a probability of future outcomes but a figure drawn from historical data, and how long assets last depends on the asset mix, the time frame, and the markets over that period, so no particular success rate is guaranteed. In Japan's lower-return environment, one widely held view is to use a withdrawal rate more conservative than 4% (around 3-3.5%).
The order of drawdowns is also an important strategy. Generally, drawing down taxable account assets first and leaving NISA and iDeCo tax-free assets for later minimizes the tax burden.
Steps to Start Designing Your Post-Retirement Income Now
Ideally, you should start designing your post-retirement income 10-15 years before retirement. First, check your projected pension amount on "Nenkin Net" (Japan's pension information portal) to establish the baseline of your monthly post-retirement income. Next, calculate your expected post-retirement monthly expenses and determine how much the monthly gap with your pension will be. This gap multiplied by 12 months multiplied by 30 years (age 65 to 95) gives you a rough target for the assets you need to prepare by retirement.
As a concrete action, in your 40s maximize your contributions to iDeCo and NISA, and from your late 50s gradually shift your portfolio toward stable assets (bonds, high-dividend stocks). Five years before retirement, organize the information needed to decide whether to defer your pension, and secure enough cash and bonds to cover living expenses from age 65 to 70. Design your post-retirement income around the three pillars of "pension," "dividends," and "drawdowns," and summarize in a table when each pillar starts and how much it provides - this will give you a retirement plan you can feel confident about.