Every yen you put into iDeCo comes off your taxable income, so it saves tax at your marginal rate on both national and resident tax. On a mid-level engineering salary that rate is 30.4%.
The reason to read this now is the December 2026 reform. An employee with no workplace pension goes from ¥23,000 to ¥62,000 a month, which lifts the annual tax saving at mid-level from ¥83,959 to ¥226,325.
Relief rate
30.4%
mid-level, national plus resident
Saved today
¥83,959
a year at ¥23,000 a month
Saved after the reform
¥226,325
a year at ¥62,000 a month
Work out your own relief and your real monthly cost.
Open the iDeCo CalculatorWhat changes in December 2026
The reform does two things: it raises the ceilings, and it abolishes the employee sub-caps that made iDeCo nearly pointless for anyone with a workplace pension. A civil servant limited to ¥12,000 a month today moves to a combined ¥62,000 ceiling across employer contributions and iDeCo.
| Your situation | Now | From Dec 2026 |
|---|---|---|
| Self-employed or freelance | ¥68,000 | ¥75,000 |
| Employee, no workplace pension | ¥23,000 | ¥62,000 |
| Employee with a workplace DC plan | ¥20,000 | ¥62,000 |
| Employee with a DB plan, or civil servant | ¥12,000 | ¥62,000 |
| Homemaker or dependent spouse | ¥23,000 | ¥23,000 |
Monthly ceilings. The change first applies to December 2026 contributions, debited in January 2027.
What the relief is worth at each salary
The relief rate is simply your marginal rate, counting the 10% resident tax alongside national income tax and the 2.1% reconstruction surtax. It does not change when the limit rises, so roughly tripling the contribution roughly triples the saving.
| Level | Relief rate | Saved at ¥23,000/mo | Saved at ¥62,000/mo |
|---|---|---|---|
| Junior¥5,769,000 | 20.2% | ¥55,780 | ¥148,339 |
| Mid-level¥8,675,000 | 30.4% | ¥83,959 | ¥226,325 |
| Senior¥11,831,000 | 33.5% | ¥92,413 | ¥249,114 |
| Principal¥15,444,000 | 43.7% | ¥120,593 | ¥325,076 |
The number that actually matters is the cost, not the saving
A mid-level engineer contributing ¥23,000 a month is not ¥23,000 a month worse off. The relief means the real reduction in take-home is ¥16,003. At ¥62,000 a month the real cost is ¥43,140. At principal level the effect is sharper still: ¥23,000 of contributions costs ¥12,951 of take-home, because the relief rate there is 43.7%.
That asymmetry is the whole argument for iDeCo on a higher Japanese salary. The same ¥23,000 saved into an ordinary brokerage account costs the full ¥23,000.
A bigger limit is not a reason to max it out
iDeCo is locked until 60. If you might leave Japan, buy a home, or need the money for anything before then, that illiquidity is a real cost that the tax relief does not offset. The reform makes a large contribution possible; it does not make it right. Decide the amount on your own horizon first, then check it against the limit.
How these figures were produced
PayMetric Labs' own calculations with the portal's iDeCo engine, which recomputes national income tax, the reconstruction surtax and resident tax at the lower taxable income after the contribution. Salaries are our Japanese software engineer benchmark levels, modelled at age 35 for a salary-only taxpayer with no dependants and no other deductions. Stacking iDeCo with medical, life insurance or home loan deductions can shift your marginal rate down a bracket and lower the relief rate shown here.
iDeCo and Furusato Nozei do different jobs
They get discussed together and they are not substitutes. Furusato Nozei converts tax you already owe into goods for a ¥2,000 self-burden, but it has a hard cap, and anything above it is a plain donation with no relief. Working out that cap correctly is the whole game.
iDeCo has no cliff and no self-burden. Contributions above your limit are refused rather than wasted, so there is no way to lose money by getting the number slightly wrong. What it does instead is lock the money away for decades. Most people on a Japanese salary should use both, and should work out the Furusato Nozei cap first because that is the one where a mistake costs money.
Check your Furusato Nozei cap too
Contributing to iDeCo lowers your taxable income, which lowers your Furusato Nozei cap as well. If you do both, work the cap out after deciding the iDeCo amount.
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Frequently asked questions
What is changing about iDeCo in December 2026?
The contribution limits rise substantially and the employee sub-caps are abolished. An employee with no workplace pension goes from ¥23,000 to ¥62,000 a month. Employees with a workplace DC or DB plan, and civil servants, lose their ¥20,000 and ¥12,000 sub-caps entirely and instead sit under a combined ¥62,000 ceiling across employer contributions and iDeCo. Self-employed contributors go from ¥68,000 to ¥75,000. The change first applies to December 2026 contributions, which are debited in January 2027.
How much tax does iDeCo actually save me?
Your marginal rate, counting both national and resident tax, on every yen you contribute. On a mid-level engineering salary of ¥8,675,000 that is 30.4%, so the current ¥276,000 of annual contributions saves ¥83,959. Once the limit rises, ¥744,000 of contributions at the same rate saves ¥226,325 a year.
Is there a cliff like Furusato Nozei has?
No, and this is the important difference. Furusato Nozei has a cap beyond which you are simply donating with no relief, so working out your limit matters. iDeCo has no such cliff and no self-burden: every yen inside your category limit is deductible at your marginal rate, and anything above the limit is simply refused rather than wasted.
What does an iDeCo contribution really cost me each month?
Much less than the amount debited. A mid-level engineer contributing ¥23,000 a month gives up ¥16,003 of take-home, because ¥6,997 comes back through lower income, surtax and resident tax. At ¥62,000 a month the real cost is ¥43,140. The higher your marginal rate, the cheaper it gets: at principal level ¥23,000 costs only ¥12,951.
Which category am I in?
It depends on what pension your employer runs, not on your job title. If your company has no DC or DB plan you are on ¥23,000 today. If it runs a corporate DC plan you are on ¥20,000, and the combined employer plus iDeCo figure must stay under ¥55,000 a month. If it runs a DB plan, or you are a civil servant, you are on ¥12,000. Your iDeCo provider's dashboard shows your actual limit, which is the figure to trust.
Can I get the money out before 60?
Essentially no. iDeCo is locked until age 60, subject to a minimum contribution period, and that illiquidity is the real trade for the tax relief. Do not contribute money you may need for a deposit, a move or an emergency. It is the reason a large limit is not automatically something to max out.
How is it taxed when I take it out?
Favourably, through the same retirement income deduction that applies to a lump-sum retirement payout: a tiered deduction based on years of contribution, with only half of the remainder taxable. Taking it as an annuity instead moves it into the public pension deduction. The withdrawal side is a separate calculation from the contribution relief described here.
Should I do iDeCo or Furusato Nozei first?
They are not alternatives and most people with a Japanese salary should do both, in different amounts. Furusato Nozei effectively converts tax you already owe into goods for a ¥2,000 self-burden, so it is close to free but capped and cliff-edged. iDeCo is real long-term saving that happens to be deductible, and it locks your money away. Work out the Furusato Nozei cap first because getting it wrong wastes money; iDeCo wastes nothing.
Related reading & tools
Contribution limits verified September 2026, including the confirmed December 2026 reform figures, which first apply to December 2026 contributions debited in January 2027. Relief figures are PayMetric Labs' own calculations at 2026 national, surtax and resident tax rates for a salary-only taxpayer aged 35 with no other deductions. Your actual limit depends on your employer's pension arrangement and is shown on your iDeCo provider's dashboard. General information only, not tax or investment advice.