2018/07/10(Sender: FC Owners Operations Office)
After starting your own business through a franchise and becoming a sole proprietor, you must not forget the reality that "you must prepare your own retirement fund" and "your pension will be based on the National Pension, which means the amount you receive will be lower than that of the Employees' Pension."
For those who were salaried employees before becoming independent, you will realize just how fortunate you were as a salaried employee, both in terms of income and security.
When starting your own business through a franchise, it is inevitable that you will use most of the savings you accumulated as a salaried employee as startup capital. So, you can just start saving again. Right now, you may be excited about "staying active for life!", but everyone will inevitably face retirement someday. In preparation for that time, let's take a look at the retirement fund systems available to sole proprietors.
The Small Business Mutual Aid is a mutual aid system for creating retirement benefits that small business owners and sole proprietors can join.It is a system that you can join at your nearest financial institution or chamber of commerce. During the membership period, it is invested at a fixed interest rate, and you can receive a maturity payment upon retirement. While income tax is levied when receiving mutual aid benefits (maturity insurance benefits), it is advantageous because you can utilize the "retirement income deduction."
Contributions are set monthly, ranging from 1,000 yen to 70,000 yen (in increments of 500 yen), and can be increased or decreased at any time by following the procedures (a reason such as "decreased income" or "illness/injury" is required for a decrease).After opening an FC, sales may fluctuate significantly from month to month or year until the business is on track. The high degree of flexibility, such as increasing contributions when sales are high and decreasing them when sales are low, is also attractive. Incidentally, contributions are fully tax-deductible (small business mutual aid contribution deduction).
Furthermore, you can receive it not only upon retirement, but also when you close your business.In addition, if you have accumulated a certain amount of contributions, you can borrow money when you need it for some reason. When you become a business owner or sole proprietor, you're bound to face financial difficulties in your work. Being able to access funds from your contributions in such situations is a significant advantage.
Management Safety Mutual Aid (Small and Medium-Sized Enterprise Bankruptcy Prevention Mutual Aid), as its name suggests, is primarily a "guarantee to prevent chain bankruptcies when a business partner goes bankrupt," and it's a system that allows you to receive a loan of up to 10 times your contributions when a business partner goes bankrupt.
On the other hand, this system can also be used to build up retirement funds for business owners and self-employed individuals, and you can join at your nearest financial institution or chamber of commerce. Contributions are fully tax-deductible. You can contribute up to 200,000 yen per month (2,400,000 yen per year).You can cancel at any time, but if the contribution period is less than 12 months, you will not receive a cancellation benefit, and it will be 0 yen. Only after contributing for 40 months (3 years and 4 months) or more will the cancellation benefit exceed the total amount contributed. However, when it is returned, it will be treated as income, so it is important to consider the timing of cancellation. The cancellation benefit received can be used for retirement funds, so many sole proprietors contribute to the Management Safety Mutual Aid system as their own retirement fund.
The individual defined contribution pension is available to those who are enrolled in the National Pension and pay insurance premiums.You can apply at the counter of your nearest bank, securities company, life insurance company, or other financial institution, but some financial institutions do not handle it, so be sure to check if it is possible. This system allows for "full income tax deduction" of monthly contributions, but you cannot withdraw the money until you are 60 years old.This system allows you to receive the money on the condition that you invest it until retirement.
For sole proprietors, the maximum monthly contribution is 68,000 yen. The difference from the previous two mutual aid schemes is that "investment depends on the individual's investment policy" and "borrowing from contributions is not possible." Contributions are invested by the individual, choosing from investment products (deposits, savings-type insurance, investment trusts) offered by the financial institution acting as the contact point. During the investment period, investment gains are treated as tax-free.
In the case of the individual type, a monthly fee of several hundred yen is charged to the financial institution. The fee is deducted from the contribution, and the remaining amount is invested. The fee varies depending on the financial institution you join, so be sure to check. In addition to this "fee," other points to consider when choosing a financial institution are "types of investment products" and "ease of use." In particular, the investment products (deposits, savings-type insurance, investment trusts) strongly reflect the type of financial institution you apply to, so please pay attention to this.
Also, if you start receiving it by age 70, it doesn't matter whether it's a "lump sum" or a "pension."For tax purposes, if it's in the form of a pension, it's treated as miscellaneous income and is eligible for the "public pension deduction." Also, if you receive it as a lump sum after age 60, it becomes retirement income and you can receive the "retirement income deduction."
Furthermore, defined contribution pensions, while not allowing withdrawals midway through, offer significant advantages for sole proprietors whose businesses face risks. This is because it is considered exempt from seizure, meaning it is protected as your own property even if your business fails.
Sole proprietors who have started their own businesses through FCs, etc., have some advantages over salaried employees. That means there is no retirement age (you can decide when to retire yourself).
Unlike salaried workers who retire at 60 or 65, you can continue working.Compared to salaried workers whose income suddenly disappears or drastically decreases after retirement, if you have established a business foundation, you will have a stable income.
When considering starting your own business as a franchisee, you may feel anxious about your retirement. However, by taking solid measures to prepare for retirement, that anxiety will be alleviated.
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松本 孝徳
Management consultant
Born in Nishinomiya City, Hyogo Prefecture in 1964. Graduated from Hyogo Prefectural Nishinomiya Imazu High School. After graduating from Meiji Gakuin University's Faculty of Law, he joined Kinki Bank, Ltd. (now Kinki Osaka Bank), where he gained experience in international business and debt collection. Subsequently, after working at a business restructuring consulting firm, he served as a project manager for a company listed on the First Section of the Tokyo Stock Exchange, specializing in governance. He became the Executive Vice President of Hojo Railway Co., Ltd., a third-sector company funded by Hyogo Prefecture and others. The restructuring process was featured in Nikkei Business and Kansai TV's News Anchor. He has extensive experience in management positions and as Chief Financial Officer (CFO). In 2011, he established Strategic Consulting LLC. Since 2012, he has also been involved in turnaround (business restructuring) for Japanese companies expanding overseas.
HP "Strategic Consulting"