A magnetic gear, which can transfer torque without contact, has many advantages over mechanical gears. These advantages include high-efficiency and high-reliability. Consequently, the magnetic gear is utilized in many different fields of study. However, because the magnetic gear uses NdFeB permanent magnets (PMs) for high power density, eddy-current loss can occur. Eddy-current loss is very problematic because it is the main factor that reduces torque transfer efficiency. Therefore, in the present study, we calculated the eddy-current loss from PMs at different rotational velocities by using a nonlinear finite element method (FEM) based on a three-dimensional numerical analysis, and analyzed how the eddy-current loss affects the torque transfer efficiency. Furthermore, we proposed a new geometry for the magnetic gear to reduce the eddy-current loss of PMs and improve the torque transfer efficiency.