Let's Build Your Own Pension with New NISA! An Easy Investment Guide to Supplementing Public Pensions with Dividends
Hello!
Have you been feeling a bit anxious about your retirement lately, thinking, "Public pension alone might not be enough..."?
I went through a time when I felt the exact same way.
In particular, the worry that you might not have enough to live comfortably on just your pension tends to cross your mind, doesn't it?
That's when I discovered how to build a "personal pension" using the New NISA!
The New NISA is an amazing system that started in 2024 where investment taxes are zero.
It is perfect for people who want to invest specifically for dividends (regular income received from stocks).
In this article, I will explain step-by-step how to utilize dividends as a "personal pension" in a way that is easy for even beginners to understand.
Furthermore, I will also cover the impact on National Health Insurance premiums and the specific methods to start investing.
Now, let's take the first step toward building your "personal pension" together!
What is the New NISA? What does it mean to use dividends as a "personal pension"?
First, let me briefly explain what kind of system the New NISA is.
NISA (Nippon Individual Savings Account) is a system where the approximately 20.315% tax normally applied to investment profits (dividends and capital gains) becomes zero.
The New NISA, which started in 2024, has been upgraded from the previous NISA and has become much easier to use!
Especially for those who want to invest for dividends (money that companies regularly give to shareholders), the New NISA is a golden opportunity to build a "personal pension."
What I mean by that is, for example, suppose you invest 1 million yen in high-dividend stocks and receive a 4% annual dividend.
Normally, about 8,000 yen in taxes would be deducted from the 40,000 yen annual dividend, leaving you with only about 32,000 yen.
But with the New NISA, the tax is zero, and you can receive the full 40,000 yen!
The idea is to steadily accumulate this as a "personal pension" of 10,000 or 20,000 yen per month.
You can add it to your public pension to help with monthly pocket money or living expenses.
The New NISA has two types of quotas.
Tsumitate Investment Quota: You can invest up to 1.2 million yen per year in low-risk investment trusts.
Growth Investment Quota: You can invest up to 2.4 million yen per year in a wide range of products such as stocks and ETFs.
If your goal is dividends, the Growth Investment Quota will be your main focus.
This is because with the Growth Investment Quota, you can buy high-dividend stocks and ETFs (products that bundle multiple stocks) and receive dividends directly.
The Tsumitate Investment Quota focuses on investment trusts aimed at capital gains and does not involve receiving dividends directly, so it is not very suitable for a "personal pension."
Amazing points of the New NISA! Check the differences from the old NISA
Let's look at why the New NISA is suitable for a "personal pension," including the differences from the old NISA (the system up to 2023).
Once you know this, you'll surely think, "The New NISA is awesome!"
1. The investment quota is huge!
Under the old NISA,
General NISA: 1.2 million yen per year (up to 6 million yen over 5 years).
Tsumitate NISA: 400,000 yen per year (up to 8 million yen over 20 years).
You could only choose one or the other.
But the New NISA is:
Tsumitate Investment Quota: 1.2 million yen per year (3 times the old Tsumitate NISA!).
Growth Investment Quota: 2.4 million yen per year.
You can invest up to a total of 3.6 million yen per year! Plus, you can use both quotas at the same time.
If your goal is dividends, make full use of the 2.4 million yen annual growth investment quota.
For example, if you invest 2.4 million yen in stocks with a 4% dividend yield, you will receive approximately 96,000 yen per year (about 8,000 yen per month) in tax-free dividends.
If you continue this for 5 years, you can invest 12 million yen and calculate that you will have built a "personal pension" of 480,000 yen per year (40,000 yen per month)!
2. The tax-free period is indefinite!
Under the old NISA, the tax-free period was fixed.
General NISA: 5 years (after which a procedure called rollover is required).
Tsumitate NISA: 20 years.
The new NISA has an indefinite tax-free period!
In other words, you can receive dividends tax-free even when you are 80 or 90 years old.
It is the perfect system for those who want to earn a stable income for life as a "personal pension."
3. A lifetime tax-free quota of 18 million yen
The tax-free quota for the old NISA was a maximum of 6 million yen (General NISA) or 8 million yen (Tsumitate NISA).
With the new NISA, you can invest up to 18 million yen tax-free over your lifetime!
Growth investment quota: Up to 12 million yen.
Tsumitate investment quota: You can use it freely up to 18 million yen.
If your goal is dividends, you can make full use of the 12 million yen growth investment quota and aim for 480,000 yen in annual dividends (40,000 yen per month).
Furthermore, it has an amazing mechanism where your quota is restored when you sell!
For example, if you sell 5 million yen worth of stocks, that 5 million yen quota will be restored the following year.
You can reinvest multiple times within the 18 million yen lifetime limit.
4. The restoration of the sales quota is convenient
Under the old NISA, once you used up your investment quota, that was it.
Even if you sold, the quota did not return.
With the new NISA, the quota for the amount sold is restored the following year, allowing for flexible management.
However, those aiming for dividends need to be careful.
If you sell stocks, the dividends for that portion will temporarily decrease (e.g., selling 1 million yen worth of stocks → 40,000 yen in annual dividends becomes zero).
The dividends will return if you buy back after the quota is restored the following year, but since your income will decrease for one year, it might be best to think carefully before selling.
Benefits of building a "personal pension" with dividends
Let's look at the benefits of using the new NISA's growth investment quota to turn dividends into a "personal pension."
1. Get dividends with zero tax!
Normally, dividends are subject to a 20.315% tax.
For example, if you have 100,000 yen in annual dividends, about 20,000 yen is deducted for taxes, leaving you with 80,000 yen.
With the new NISA, you can receive the full 100,000 yen!
When this adds up to 10,000 or 20,000 yen per month, it is very reassuring as a supplement to your public pension, isn't it?
2. Regular income like a pension
Dividends are money paid by companies once or twice a year (often during the March or September settlement periods).
If you choose stable companies, it will come in regularly just like a "pension."
For example, if you invest 12 million yen in stocks with a 4% dividend yield, it results in an income of 480,000 yen per year (40,000 yen per month).
Added to your public pension (e.g., 150,000 yen per month), it creates more room in your monthly living expenses.
3. Does not affect National Health Insurance premiums
National Health Insurance (NHI) premiums increase as your income rises.
However, since NISA dividends are tax-free, they have absolutely no impact on the calculation of NHI premiums.
In other words, even if your dividends increase, your premiums won't go up, and the money remains in your hands as pure income.
This is a super welcome point for pensioners!
4. Long-term stable management is possible
Since the tax-free period for the new NISA is indefinite, you can receive dividends for decades.
Even if your public pension loses value due to rising prices, if your dividends come from companies that are resistant to inflation (e.g., companies that continue to increase dividends), it is easier to maintain your income.
Points to note: Risks of dividend investment and countermeasures
Building a 'personal pension' is attractive, but there are risks to investing.
Here, I will introduce points and countermeasures that beginners should be aware of.
1. Dividend fluctuation risk
If a company's performance deteriorates, they may reduce or eliminate dividends.
For example, during the COVID-19 pandemic, there were cases where airlines and retailers cut dividends.
Countermeasures:
Choose stable companies: Companies with stable performance such as telecommunications (KDDI, NTT), infrastructure (Tokyo Gas), and finance (Mitsubishi UFJ Financial Group).
Consecutive dividend increase stocks: Check companies that increase their dividends every year, such as Kao and Mitsubishi Corporation.
Diversify with ETFs: High-dividend stock ETFs (e.g., Nikkei High Dividend Stock 50 ETF) invest in multiple companies, so the impact is smaller even if one company cuts its dividend.
2. Risk of principal loss
Stock prices fluctuate, so there is a possibility that the money you invested (principal) will decrease.
Even if your goal is dividends, be aware that if the stock price falls, the value of your assets will decrease.
Countermeasures:
Invest an amount you can afford: Keep an emergency fund (e.g., 1-2 years of living expenses) and invest about 30-50% of your savings.
Diversified investment: Do not concentrate on one company; diversify into 10-20 stocks or ETFs.
Long-term holding: Continue to receive dividends without worrying about short-term fluctuations in stock prices.
3. Decrease in dividends due to selling
If you sell stocks in the growth investment quota, your dividends will temporarily decrease.
The quota will be restored the following year, but since your income will decrease for one year, it will affect your 'personal pension'.
Countermeasures:
Buy and Hold: Make long-term holding without selling your basic strategy.
Small-scale sales: Sell only a portion when necessary to minimize the reduction in dividends.
Planned management: If you do sell, plan to repurchase high-dividend stocks using the following year's allowance.
4. Growth Investment Quota Limit
The growth investment quota is limited to 2.4 million yen per year and 12 million yen over a lifetime.
If you want to invest a large amount of capital, you will need an account outside of NISA (a taxable account), and dividends will be subject to tax.
Countermeasures:
First, make full use of the NISA growth investment quota.
Invest additional funds in a taxable account (specified account with withholding tax) to minimize the impact on National Health Insurance premiums (explained in detail later).
Relationship with National Health Insurance (NHI) premiums: Tips for keeping dividend burdens low
For those living on public pensions, NHI premiums are a significant burden, aren't they?
I will explain how to ensure that receiving dividends does not increase your NHI premiums.
How NHI premiums are calculated: NHI premiums are determined based on household income (salary, pension, business income, etc.).
The higher your income, the higher your premiums, but dividends are a bit special.
Normally, dividends are subject to 'separate self-assessment taxation,' and the securities company automatically deducts tax (20.315%) (withholding tax).
In this case, if you do not file a tax return, the dividends are not included in the calculation of NHI premiums.
In other words, even if your dividends increase, your premiums will not go up!
NISA dividends have zero impact on NHI
Dividends received through the new NISA growth investment quota are tax-free, so no tax return is required.
As a result, they have absolutely no impact on the calculation of NHI premiums.
For example, even if you earn 480,000 yen in dividends per year through NISA, your NHI premiums will not increase by even one yen.
This is why NISA is super advantageous as a 'personal pension'!
Handling dividends in a taxable account (specified account)
Once you have used up your NISA quota (12 million yen), you will invest through a taxable account (specified account).
What is important here is to choose a 'specified account with withholding tax'.
Withholding tax: Tax is automatically deducted from dividends, and no tax return is required. No impact on NHI premiums.
No withholding tax: You must file your own tax return. If you file, the dividends are counted as income, which may increase your NHI premiums.
Example:
100,000 yen in annual dividends in a specified account (2.5 million yen invested at a 4% yield).
With tax withholding: About 20,000 yen is deducted for taxes, and you receive 80,000 yen. No tax return is required, and it does not affect your National Health Insurance premiums.
If you file a tax return: The 100,000 yen is added to your income, and your National Health Insurance premiums may increase by several thousand to several tens of thousands of yen (depending on the municipality).
Countermeasures:
When opening a specific account, select "with tax withholding."
Only file a tax return if there are benefits such as loss offsetting (offsetting stock losses against other profits) or tax refunds.
Consult with your local municipality's National Health Insurance department (e.g., check how much your premiums will increase with 100,000 yen in dividends).
Points to note for those 70 and older
For those aged 70 to 74, your out-of-pocket medical expense ratio (10% to 30%) changes based on your income.
If you file a tax return for dividends, your income increases, which could raise your out-of-pocket ratio.
With NISA or a specific account "with tax withholding," you can avoid this impact.
Concrete steps to build your own pension with dividends
Once you decide, "Okay, I'll build my own pension with the new NISA!", here are the concrete steps on how to get started.
Step 1: Open a NISA account
Where to open: Online securities firms (SBI Securities, Rakuten Securities) are recommended. Fees are low, and there is a wide variety of stocks.
Procedure: Apply online. If you have a My Number card or driver's license, the account can be opened in a few days.
Tip: Set it to use the Growth Investment Quota. If you choose the "proportional dividend distribution method," dividends will be deposited into your securities account tax-free.
Step 2: Decide on your investment amount
Reasonable amount: Keep your emergency fund (1-2 years of living expenses, e.g., 3 million yen) and invest 30-50% of your savings.
Example: If you have 10 million yen in savings, put 3-5 million yen into NISA.
The Growth Investment Quota is up to 2.4 million yen per year. Adjust according to your budget, such as 200,000 yen per month for 12 months or a lump sum of 2.4 million yen.
Step 3: Choose high-dividend stocks
Choosing the right stocks is super important for receiving stable dividends!
Below are some recommended examples (as of September 2025; check with your securities firm for the latest information):
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Japanese Stocks:
KDDI (9433): Major telecommunications company. Yield ~4%. Stable dividend track record.
Japan Tobacco (JT, 2914): Yield ~5-6%. Popular for high dividends.
Mitsubishi Corporation (8058): Trading company. Yield ~3.5%. Trend of increasing dividends.
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ETFs:
Nikkei High Dividend 50 ETF (1489): Diversified investment in 50 high-dividend Japanese companies.
iShares Core J-REIT ETF (1476): For those who want to receive dividends from real estate investment trusts.
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Tips for Choosing:
Aim for a dividend yield of 3-5% (too high can indicate risk).
Look for companies with consecutive dividend increases (10+ years) or stable business performance (telecom, infrastructure, finance).
Check the 'Dividend Yield Ranking' using your brokerage's screening tool.
Step 4: Execute Investment
How to Buy: Purchase your selected stocks or ETFs via your brokerage's app or website.
Example: Purchase KDDI (4% yield) with 1 million yen in the Growth Investment Quota → 40,000 yen in annual dividends (tax-free).
Diversification: Do not concentrate on one company; spread your investment across 5-10 stocks or ETFs.
Timing: You can invest in a lump sum or steadily month by month (e.g., 200,000 yen per month). Buying when stock prices drop can also increase your dividend yield.
Step 5: Receive Dividends
Dividends are deposited into your brokerage account once or twice a year (often in March and September).
Example: 6 million yen investment (4% yield) → 240,000 yen per year (20,000 yen per month) in dividends.
You can use the dividends you receive for living expenses or reinvest them.
Step 6: Utilize Taxable Accounts (After Using Up Your NISA Allowance)
Once you have used up your NISA Growth Investment Quota (12 million yen), make additional investments in a specific account (with tax withholding).
Example: 5 million yen investment in a specific account (4% yield) → 200,000 yen per year in dividends (approx. 160,000 yen after tax).
As long as you do not file a tax return, it will not affect your national health insurance premiums.
Actual Simulation: How Much of a "Personal Pension" Can You Build?
Let's simulate specifically how much in dividends you can earn.
Assumption: 4% dividend yield (average high-dividend stock), fully utilizing the NISA Growth Investment Quota.
Case 1: 3 million yen investment
Invest 1.2 million yen per year (100,000 yen per month) for 3 years using the Growth Investment Quota.
3 million yen × 4% = 120,000 yen per year (10,000 yen per month) in dividends (tax-free).
Add 10,000 yen per month to your public pension (e.g., 150,000 yen per month). Good for small treats or utility bills.
Case 2: 6 million yen investment
Invest 2.4 million yen per year for 2.5 years.
6 million yen × 4% = 240,000 yen per year (20,000 yen per month) in dividends (tax-free).
With your public pension plus 20,000 yen per month, you'll have more room for travel and hobbies!
Case 3: 12 million yen investment (Full utilization of Growth Investment Quota)
Invest 2.4 million yen annually for 5 years.
12 million yen × 4% = 480,000 yen per year (40,000 yen per month) in tax-free dividends.
With public pension + 40,000 yen per month, you can enjoy a much more comfortable life. Treat yourself to dining out or gifts for your grandchildren!
If you add a taxable account
Invest 12 million yen in the NISA quota + 5 million yen in a specific account.
Specific account: 5 million yen × 4% = 200,000 yen per year (approx. 160,000 yen after tax).
Total: 480,000 yen (NISA) + 160,000 yen (specific account) = 640,000 yen per year (approx. 53,000 yen per month).
To avoid affecting your National Health Insurance premiums, select "with tax withholding" for your specific account.
Tips for Dividend Investing and Recommended Stocks
To succeed with your "own pension," stock selection and investment methods are key.
Here, I will introduce tips that are easy for beginners to practice, along with specific stock examples.
Tip 1: Choose stable, high-dividend stocks
Dividend yield: Aim for 3–5%. While 6% or more is attractive, be wary of the risk of declining business performance.
Consecutive dividend increases: Companies that have increased dividends for 10 years or more are highly reliable.
Industry: Telecommunications (NTT, KDDI), infrastructure (Tokyo Gas), finance (Mitsubishi UFJ), and trading companies (Mitsubishi Corp) offer stability.
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Examples:
NTT (9432): Yield ~3.5%. The largest domestic telecommunications company with a trend of increasing dividends.
Mitsubishi UFJ Financial Group (8306): Yield ~4%. Stable major bank.
Tokyo Gas (9531): Yield ~3.5%. Low-risk infrastructure.
Tip 2: Diversify risk with ETFs
Concentrating on a single company carries the scary risk of dividend cuts.
With ETFs, you can invest in multiple high-dividend stocks at once, keeping risk low.
Nikkei High Dividend Stock 50 ETF (1489): Invests in high-dividend stocks of 50 Japanese companies. Yield ~3.5%.
iShares Core J-REIT ETF (1476): Real estate investment trust with a yield of ~4%.
Some ETFs pay dividends frequently, such as four times a year, making them perfect for your "own pension."
Tip 3: Consider reinvesting dividends
While it's fine to spend the dividends you receive as they are, reinvesting them will make your dividends grow like a snowball.
Example: Reinvesting 40,000 yen in annual dividends (4% yield) → The investment becomes 1.04 million yen the following year, and the dividends become approximately 41,600 yen.
You can set up automatic reinvestment by configuring a Dividend Reinvestment Plan (DRIP) at your brokerage firm.
Tip 4: Review periodically
Since stock prices and dividend yields fluctuate, check your portfolio once or twice a year.
Check corporate earnings announcements (March, September).
Utilize the "Dividend Yield Ranking" tool provided by your brokerage firm.
For stocks with a high risk of dividend cuts, switch to other high-dividend stocks early.
Investing in taxable accounts: What if you use up your NISA allowance?
Once you have used up your NISA Growth Investment Quota (12 million yen), you can continue investing in a specific account (Tokutei Koza).
Here, I will explain how to use a taxable account for dividend purposes.
Reasons to choose a specific account with tax withholding
Dividend tax: 20.315% is deducted (e.g., 100,000 yen in annual dividends → approximately 80,000 yen take-home).
Impact on National Health Insurance premiums: If you choose "withholding tax," you do not need to file a tax return, and dividends are not included in the calculation of National Health Insurance premiums.
Example: Investing 5 million yen in a specific account (4% yield) → 200,000 yen in annual dividends (160,000 yen after tax). National Health Insurance premiums do not increase.
Caution: If you file a tax return, dividends are added to your income, and National Health Insurance premiums will increase by several thousand to several tens of thousands of yen (depending on the municipality).
Example of operating a taxable account
Scenario: Investing 12 million yen in NISA (480,000 yen in annual dividends, tax-free) + investing 3 million yen in a specific account (120,000 yen in annual dividends, approximately 96,000 yen after tax).
Total: 480,000 yen + 96,000 yen = 576,000 yen (approximately 48,000 yen per month) as your "own pension."
You can choose high-dividend stocks or ETFs in your specific account as well, and the same strategy as NISA is fine.
Deciding on filing a tax return
If you incur a loss on stocks, you may be able to get a tax refund by filing a tax return to offset the loss against other profits.
However, filing a return may affect your national health insurance premiums based on your dividends.
Decision criteria: If the refund amount (e.g., tens of thousands of yen) is less than the increase in national health insurance premiums (e.g., tens of thousands of yen), it is better not to file.
It is recommended to consult with your local municipal office's national health insurance department and have them run a simulation for you.
Impact on Daily Life: How Does Your Own Pension Change Things?
Let's imagine what kind of positive impact a "personal pension" from dividends can bring to your life.
10,000 yen in monthly dividends (3 million yen investment)
Impact on life: Helps cover utility bills or food expenses. Can be used for dining out once a month or for hobbies.
Psychological peace of mind: Just having a little extra on top of your public pension increases your sense of security for "when something happens."
20,000 yen in monthly dividends (6 million yen investment)
Impact on life: Makes travel, gifts for grandchildren, and slightly more luxurious purchases possible.
Example: With 240,000 yen per year, you can afford one domestic trip per year (100,000 yen) plus an extra 10,000 yen per month for daily living expenses.
40,000 yen in monthly dividends (12 million yen investment)
Impact on life: Significant breathing room in your life! Helps with rent subsidies, medical expenses, and enriching your hobbies.
Example: With 40,000 yen per month, you can cover your monthly living expenses while also making an annual overseas trip a reality.
Balance with National Health Insurance Premiums: Since NISA dividends do not affect national health insurance premiums, the amount of money you can freely use increases. Even when using taxable accounts, if you choose the "withholding tax" option to keep your national health insurance burden low, you can increase your income efficiently.
5 Points for Beginners to Avoid Failure
Finally, here are the ironclad rules for beginners to build a "personal pension" through dividends.
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Keep an emergency fund
Secure 1-2 years' worth of living expenses (e.g., 3 million yen) in cash. Only invest with surplus funds.
Be careful, as selling stocks for sudden expenses will reduce your dividends.
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Reduce risk through diversified investment
Do not concentrate on one company; split your investment across 5-10 stocks or ETFs.
Example: 1 million yen each in KDDI, JT, Mitsubishi Corporation, and a Nikkei high-dividend stock ETF.
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Prioritize stable companies
Dividend yield of 3-5%, 10+ years of consecutive dividend increases, and stable performance (telecommunications, infrastructure, finance).
Utilize brokerage 'dividend yield rankings' and 'consecutive dividend increase stock lists'.
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Make long-term holding the standard
To receive dividends consistently, keep selling to a minimum.
Focus on dividends rather than worrying about short-term stock price fluctuations.
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Be aware of National Health Insurance premiums
NISA has no impact on National Health Insurance premiums.
Use taxable accounts with 'tax withholding' to avoid filing a tax return and prevent increases in National Health Insurance premiums.
Check with your local government's National Health Insurance office in advance regarding the impact of dividends.
Summary: Start your 'own pension' with the new NISA!
The growth investment quota of the new NISA is the best tool for creating an 'own pension' through dividends.
Tax-free: Zero tax on dividends, increasing your take-home pay.
Indefinite: You can receive dividends for decades.
No impact on National Health Insurance premiums: It becomes pure income without increasing your insurance premium burden.
Flexibility: Selling assets restores your quota, making long-term management easier.
Example:
6 million yen investment (4% yield) → 20,000 yen in monthly dividends.
Invest 12 million yen → 40,000 yen in monthly dividends.
Add this to your public pension to bring more comfort and enjoyment to your life!
Actions you can take right now
Open a brokerage account: Quickly open a NISA account with SBI Securities or Rakuten Securities.
Research stocks: Check out high-dividend stocks (KDDI, JT) or ETFs (Nikkei High Dividend Stock 50 ETF).
Start with a small amount: Begin with 100,000 or 500,000 yen to get used to investing.
Check National Health Insurance: Ask your local government's National Health Insurance office about the impact of dividends.
Gather information: Get the latest updates using brokerage tools, investment blogs, and investor posts on X.
Let's resolve the anxiety of 'public pension alone isn't enough' with the new NISA!
Add comfort and enjoyment to your retirement life with a 'personal pension' from dividends.
Let's aim for a secure and enjoyable retirement together!
