Japan retirement age extension impacts severance pay

Changes in retirement ages from 60 to 65 can significantly impact retirement benefits in Japan. When a company extends its mandatory retirement age, employees who choose to leave at the previous age of 60 may be classified as resigning for personal reasons rather than retiring at the mandatory age. This distinction often results in lower severance payments.

According to data from the Ministry of Health, Labour and Welfare, there are notable differences in average retirement benefits based on the reason for leaving. For employees with over 20 years of service, those in management or technical roles with university degrees received an average of 18.96 million yen for retirement, compared to 14.41 million yen for those resigning for personal reasons.

However, some companies offer early retirement incentives that can result in higher payouts than standard retirement benefits. Employees are advised to review their specific company regulations and consider total lifetime earnings, including lost wages and bonuses, before deciding on their retirement timing.