CPF vs SRS advice

[Okenba]

Lets say you are in your late 20s in the 7% bracket.

to reduce tax would you

1. topup SRS / CPF /Both / None(pay taxes)
2.justify your choice and why not the other?

I understand that both gives a 1:1 tax relief , however why is one better then the other, also is it better to just pay taxes and keep cash liquid considering other financial goals e.g getting a house.

Didn't read the 4 pgs of responses.
I don't think 7% is that big a deal to search for tax relief.
Having said that, you can still consider topping up for your parents to get $7k tax relief.

I would start on SA in next tax bracket. And SRS only after having topped up SA to FRS.
In the meantime, I would invest OA (not transfer to SA).
If buying house, should have enough lead time to save in OA for downpayment. (Est 1-2 yrs should be enough...)

In the meantime, make sure emergency funds, insurance, are all in place. And then invest in cash.

 

[dork32]

If you don’t want cpf and only want SRS, I’ll go for cash.

I think SRS is not worth it.

i think this concept is wrong. srs can be used to buy anything listed on the sgx. cpf sa cannot. let say i like to buy stocks on sgx and hold for long long time, why not buy through srs and get a 7%,11% discount?

 

[naro]

i think this concept is wrong. srs can be used to buy anything listed on the sgx. cpf sa cannot. let say i like to buy stocks on sgx and hold for long long time, why not buy through srs and get a 7%,11% discount?

Agreed. Personally, if one is in the 7% income tax bracket, no real need to put money in SRS. When one reaches 11%, one should seriously consider putting money in SRS or do cpf top-up.

 

[Andrew833]

i think this concept is wrong. srs can be used to buy anything listed on the sgx. cpf sa cannot. let say i like to buy stocks on sgx and hold for long long time, why not buy through srs and get a 7%,11% discount?

He mean if TS don’t want to choose cpf and only want SRS, he prefer to go for cash.
SRS will still be tax when you reach the year to withdraw.
Cash, you can invest in any thing. SRS is still limited.

 

[reddevil0728]

i think this concept is wrong. srs can be used to buy anything listed on the sgx. cpf sa cannot. let say i like to buy stocks on sgx and hold for long long time, why not buy through srs and get a 7%,11% discount?

cause is not a true discount.

 

[xiaosinsinful]

the same can be said for the obsession of not paying tax now is insane too

SRS for retirement for sure.

The obsession of not paying tax at retirement is insane. Growing wealth tremendously with a long investment horizon with tax savings and paying tax later on is not a problem.

A lot of points shared doesn't resonate with me, especially around RSTU. People DAMN LUCKY cpf didn't reduce SA rates this year ok, still want to put your retirement money at the mercy of garment. Hais.

I resonate with s0crates and i fully understand your point of view. Yes, at retirement you would have to pay taxes however, the taxes you save now + the investment for that 20/30 year horizon would have easily outweight the negative of withdrawal taxation @62. I thought of that too. hence i created this thread. SRS to do investment , reduce taxes at the sametime. But it think some others might have suggested paying tax and keeping the cash liquids for bigger life goals

 

[reddevil0728]

I resonate with s0crates and i fully understand your point of view. Yes, at retirement you would have to pay taxes however, the taxes you save now + the investment for that 20/30 year horizon would have easily outweight the negative of withdrawal taxation @62. I thought of that too. hence i created this thread. SRS to do investment , reduce taxes at the sametime. But it think some others might have suggested paying tax and keeping the cash liquids for bigger life goals

Agreed. But it also depends on how much taxes you are paying now.

You are only in the 7% tax bracket. Which is why I say considering all things you mentioned, cash seems better.

Had you have a higher tax burden, then SRS might start to make more sense.

 

[Okenba]

I resonate with s0crates and i fully understand your point of view. Yes, at retirement you would have to pay taxes however, the taxes you save now + the investment for that 20/30 year horizon would have easily outweight the negative of withdrawal taxation @62. I thought of that too. hence i created this thread. SRS to do investment , reduce taxes at the sametime. But it think some others might have suggested paying tax and keeping the cash liquids for bigger life goals

SRS 62 then can touch. CPF at least 55 can touch liao.
CPF withdrawal is also tax free.

 

[henrylbh]

cause is not a true discount.

It is a true discount for those who don't do anything with the money in SRS in the same way that they never did anything with the money outside SRS. No?

 

[reddevil0728]

It is a true discount for those who don't do anything with the money in SRS in the same way that they never did anything with the money outside SRS. No?

That’s why it’s based on the premise right?

 

[henrylbh]

That’s why it’s based on the premise right?

It's more a scheme to encourage ordinary people to save extra money for retirement.

 

[dork32]

He mean if TS don’t want to choose cpf and only want SRS, he prefer to go for cash.
SRS will still be tax when you reach the year to withdraw.
Cash, you can invest in any thing. SRS is still limited.

people already say. if you withdraw 40k after you stop work, then there is no tax.

srs can invest in almost anything cash can buy if you are talking about sg products

 

[dork32]

It is a true discount for those who don't do anything with the money in SRS in the same way that they never did anything with the money outside SRS. No?

so why is it not a true discount if i use the srs money to buy dbs shares?

 

[dork32]

Agreed. But it also depends on how much taxes you are paying now.

You are only in the 7% tax bracket. Which is why I say considering all things you mentioned, cash seems better.

Had you have a higher tax burden, then SRS might start to make more sense.

for myself, i am in the 11%, so not bad return.

to me whether it is 7%, 11% or higher, it is all good.

but to me when you are at 7%, chances are you are still quite young. all lot of big ticket items has not been bought. i did not put srs when i was in 7%, not because it is not good, but because, i have not much money

 

[reddevil0728]

It's more a scheme to encourage ordinary people to save extra money for retirement.

don't disagree. But based on the premise, I just feel that the trade-off ain't great enough to go for SRS

for myself, i am in the 11%, so not bad return.

to me whether it is 7%, 11% or higher, it is all good.

but to me when you are at 7%, chances are you are still quite young. all lot of big ticket items has not been bought. i did not put srs when i was in 7%, not because it is not good, but because, i have not much money

Yep. hence based on that premise, I feel the cons of SRS ain't worth the trade-off. might as well hold cash.

 

[s0crates]

I saw endowus wrote a very good piece on how to maximise SRS. Especially important for those thinking that not paying tax for SRS = maximising wealth .

https://endowus.com/insights/solvin...rimary-6-math-terms-and-sensitivity-analysis/

Agreed. But it also depends on how much taxes you are paying now.

You are only in the 7% tax bracket. Which is why I say considering all things you mentioned, cash seems better.

Had you have a higher tax burden, then SRS might start to make more sense.

 

[reddevil0728]

I saw endowus wrote a very good piece on how to maximise SRS. Especially important for those thinking that not paying tax for SRS = maximising wealth .

https://endowus.com/insights/solvin...rimary-6-math-terms-and-sensitivity-analysis/

“The higher the assumed return on investment, the worse off you are.”

I’m not suggesting no to SRS. I’m just saying it might not make sense at the get go.

There ain’t a one-size fits all rule. So it really depends on the premise.

As I mentioned in my first post, paying less tax is secondary, but it’s more about what your objective is. Paying less tax is a by product.

If I really want to have a true maximisation of my returns, I wouldn’t only look at how much tax I can save now, but how much tax I can save in total and how much returns i can get as a whole.

 

[BBCWatcher]

“The higher the assumed return on investment, the worse off you are.”

I can solve this problem! I'll take those higher gains off your hands (whatever is above a 1%/year net yield, for example) and pay all the income tax associated with your qualified withdrawals, subject to a cap of 98% of the amount remitted to me. Do we have a deal?

 

[8zaoyu]

for myself, i am in the 11%, so not bad return.

to me whether it is 7%, 11% or higher, it is all good.

but to me when you are at 7%, chances are you are still quite young. all lot of big ticket items has not been bought. i did not put srs when i was in 7%, not because it is not good, but because, i have not much money

Most employees in the 11% tax bracket are near statutory retirement age of 62 OR still staying in their iron-rice bowl jobs under Re-employment. If you are not near SRS non-penalty draw out date from statutory age, and happen to chance a "bounced out and last unit property you will appreciate your CPF OA and cash warchest for downpayment! Read on the penalty to use SRS for emergency if before current 62 years old Statutory Retirement Age. I may not be right, just my views only.

 

[dork32]

Most employees in the 11% tax bracket are near statutory retirement age of 62 OR still staying in their iron-rice bowl jobs under Re-employment. If you are not near SRS non-penalty draw out date from statutory age, and happen to chance a "bounced out and last unit property you will appreciate your CPF OA and cash warchest for downpayment! Read on the penalty to use SRS for emergency if before current 62 years old Statutory Retirement Age. I may not be right, just my views only.

i am still under 50. so many years left to work.

my oa is 250k cash 400k. i do not believe 15k from my cash to my srs is going to affect me that much.

yes, i may be going for my fourth property. Even if i do that there is a high chance that i am going to pay cash, with not much loan. the property will be for my wife, she is unemployed and cannot take a loan.

but if i were to survive just on my 3 properties, then srs contribution is not going to affect me one bit.