3. Building a “Personal Pension” Using Government Bonds

In the past, the so-called “¥20 million retirement problem” became a major topic in Japan. However, the amount of money needed for retirement varies from person to person.
That said, it is important not to rely solely on public pensions and to prepare your own retirement savings.

In this article, we will introduce how to use 10-year Japanese government bonds for individuals to build a “personal pension”-like system that can provide monthly income in the future.

■ Features of 10-Year Individual Government Bonds

There are various types of government bonds, but here we focus on the 10-year individual Japanese government bond.

It has two main features:

1) Issued every month

10-year individual government bonds are issued every month.
Therefore, by continuously purchasing a fixed amount each month, you will eventually have bonds maturing every month starting 10 years later.

In other words:

Buy bonds every month
From 10 years later, bonds mature every month and the principal is returned

This creates a steady cash-flow cycle.

2) Floating interest rate

The 10-year individual government bond has a “floating interest rate,” which is reviewed every six months.

As a result, compared to fixed-rate products, it tends to be relatively more favorable in rising interest rate environments.

However, it is important to note that it does not fully track inflation.

■ Basic Concept

From the time you start working until retirement, a period of about 40 years, you invest a fixed amount every month.

In addition, the funds returned from matured bonds after 10 years are reinvested, gradually increasing future income.

Rather than generating income from investment profits, this approach is closer to:

Structuring long-term savings so that they return as a monthly income stream in the future.

■ Example Simulation (¥20,000 per month investment)

Assume you invest ¥20,000 every month for 40 years.

・Years 0–10

Invest ¥20,000 per month

・Years 10–20

¥20,000 investment + ¥20,000 from matured bonds
→ Purchase ¥40,000 worth of bonds per month

・Years 20–30

¥20,000 investment + ¥40,000 from matured bonds
→ Purchase ¥60,000 worth of bonds per month

・Years 30–40

¥20,000 investment + ¥60,000 from matured bonds
→ Purchase ¥80,000 worth of bonds per month

As a result, after 40 years, you can build a system that:

Provides around ¥80,000 per month in returning principal in a structured, “personal pension”-like form.

Depending on your needs, you can:

Receive the monthly payouts
Reinvest part of them
Use them as a lump sum

This allows for flexible financial planning.

■ Supplementary Notes

Individual government bonds are relatively safe and have principal protection
Interest is paid every six months
Reinvesting interest (using it to purchase additional bonds) may create compounding effects
Interest rates fluctuate, so they do not fully adjust to future inflation