Key Facts
• Many companies extend retirement age beyond 60, with 62.2% having 60-year retirement and 34.9% at 65 or no retirement (2025 data).
• Despite extended employment, income sharply drops at 60, called the “income drop cliff.”
• Income drop depth varies by company; higher pre-60 income means steeper drop.
• Example 1: Annual income drops from 8 million yen to 3 million yen at 60.
• Take-home pay falls from approx. 490,000 yen to 170,000 yen (no bonus) or 370,000 yen to 140,000 yen (with bonus).
• Example 2: Annual income drops from 10 million yen to 3.6 million yen.
• Take-home pay falls from approx. 610,000 yen to 190,000 yen (no bonus) or 450,000 yen to 160,000 yen (with bonus).
• High pre-retirement resident tax (~34,000–50,000 yen/month) continues to be deducted after income drop.
• Without countermeasures, retirees face annual deficits over 1 million yen, reducing retirement funds by 5 million yen in 5 years.
• Recommended actions include: informing spouse about income drop, budgeting food and daily expenses, increasing spouse’s income, checking other income sources, and consulting HR about post-60 salary ranges.
Summary
While many companies now extend retirement age to 65 or abolish it, employees face a significant income drop at age 60, termed the “income drop cliff.” This drop is more severe for those with higher pre-retirement salaries. For example, a person earning 8 million yen annually before 60 may see take-home pay fall to as low as 140,000 yen monthly after retirement, due to reduced salary and continued deductions of resident tax based on previous high income. Without proper financial planning, retirees risk depleting their savings by over 5 million yen within five years. To mitigate this, experts advise open communication with spouses, strict budgeting, increasing household income, reviewing other income sources like pensions, and proactively seeking information on post-retirement pay. Addressing the income drop early is crucial for a stable and secure retirement.
