SRS = 7% "returns" annually

[mystikboy]

I realised that it makes complete sense to deposit an amount equal to [income] minus [S$40k] in SRS annually.

Assuming that
1. You do not need this money at all for the long term
2. You are unable to invest at a rate above [~7%] + [~Rate of returns for whatever you are comfortable investing in by using your SRS funds]

I think this is best explained with an example. Assuming I am earning S$60k a year. Putting S$15.3k in SRS nets me an instant 7% in income tax savings of $1,071. If i did not put this money in SRS, I would have lost this $1,071 to income tax and have only $14,229 left. So put another way, I "gained" this $1,071, and this is before I even invest this $15.3k that is now transferred to SRS.

Even if i then apply this S$15.3k in SRS towards fixed deposit, i would have already "gained" this 7% + whatever rate of returns from the fixed deposit. If i decide to apply this money towards STI ETF, i could potentially reap a rate of returns at 4%, which would net me $612, assuming I lump sum into STI ETF straight away after depositing into SRS. This is a potential gain of $1,071 + $612 = $1,683.

Therefore, i would only ever not put money in SRS if i am certain that with the remaining S$14,229, i can bring in returns higher than $1,683, or about ~12%.

Any thoughts on the above?

 

[item2sell]

If you don’t need the money. Might as well donate it.

 

[hwmook]

I realised that it makes complete sense an amount equal to [income] minus [S$40k] in SRS annually.

Assuming that
1. You do not need this money at all for the long term
2. You are unable to invest at a rate above [~7%] + [~Rate of returns for whatever you are comfortable investing in by using your SRS funds]

I think this is best explained with an example. Assuming I am earning S$60k a year. Putting S$15.3k in SRS nets me an instant 7% in income tax savings of $1,071. If i did not put this money in SRS, I would have lost this $1,071 to income tax and have only $14,229 left. So put another way, I "gained" this $1,071, and this is before I even invest this $15.3k that is now transferred to SRS.

Even if i then apply this S$15.3k in SRS towards fixed deposit, i would have already "gained" this 7% + whatever rate of returns from the fixed deposit. If i decide to apply this money towards STI ETF, i could potentially reap a rate of returns at 4%, which would net me $612, assuming I lump sum into STI ETF straight away after depositing into SRS. This is a potential gain of $1,071 + $612 = $1,683.

Therefore, i would only ever not put money in SRS if i am certain that with the remaining S$14,229, i can bring in returns higher than $1,683, or about ~12%.

Any thoughts on the above?

Are you 61 years old? If not then you need to do the maths for subsequent years....in the end this will shrink to just small figure after 30 years.

 

[mystikboy]

Are you 61 years old? If not then you need to do the maths for subsequent years....in the end this will shrink to just small figure after 30 years.

For the immediate year, it will be 7%. And every year that I invest $15.3k, it's 7% returns/savings that year.

 

[articland05]

yeah. any tax relief is instant savings which equals to money gain if u see if from a diff angle

Sent from LGE LG-H990 using GAGT

 

[s0crates]

That's not the way to look at it. Let's say you are 30 years old this year. You are at 7% tax bracket, but you put in the money in a 32 year fixed deposit with 2% return. The 15300 you put in grew to 1.02^32*15300 = 28833.47. your post tax money is 14229, as you pointed out, so your annual compounded growth rate is (28833.47/14229)^(1/32) =1.0223, or 2.23% EVEN WITH TAX SAVINGS.

Kindly take market risk even with SRS account else it's a waste of opportunity cost.

I realised that it makes complete sense to deposit an amount equal to [income] minus [S$40k] in SRS annually.

Assuming that
1. You do not need this money at all for the long term
2. You are unable to invest at a rate above [~7%] + [~Rate of returns for whatever you are comfortable investing in by using your SRS funds]

I think this is best explained with an example. Assuming I am earning S$60k a year. Putting S$15.3k in SRS nets me an instant 7% in income tax savings of $1,071. If i did not put this money in SRS, I would have lost this $1,071 to income tax and have only $14,229 left. So put another way, I "gained" this $1,071, and this is before I even invest this $15.3k that is now transferred to SRS.

Even if i then apply this S$15.3k in SRS towards fixed deposit, i would have already "gained" this 7% + whatever rate of returns from the fixed deposit. If i decide to apply this money towards STI ETF, i could potentially reap a rate of returns at 4%, which would net me $612, assuming I lump sum into STI ETF straight away after depositing into SRS. This is a potential gain of $1,071 + $612 = $1,683.

Therefore, i would only ever not put money in SRS if i am certain that with the remaining S$14,229, i can bring in returns higher than $1,683, or about ~12%.

Any thoughts on the above?

 

[endlssorrow]

Put inside SA better

 

[yiron]

I realised that it makes complete sense to deposit an amount equal to [income] minus [S$40k] in SRS annually.

Assuming that
1. You do not need this money at all for the long term
2. You are unable to invest at a rate above [~7%] + [~Rate of returns for whatever you are comfortable investing in by using your SRS funds]

I think this is best explained with an example. Assuming I am earning S$60k a year. Putting S$15.3k in SRS nets me an instant 7% in income tax savings of $1,071. If i did not put this money in SRS, I would have lost this $1,071 to income tax and have only $14,229 left. So put another way, I "gained" this $1,071, and this is before I even invest this $15.3k that is now transferred to SRS.

Even if i then apply this S$15.3k in SRS towards fixed deposit, i would have already "gained" this 7% + whatever rate of returns from the fixed deposit. If i decide to apply this money towards STI ETF, i could potentially reap a rate of returns at 4%, which would net me $612, assuming I lump sum into STI ETF straight away after depositing into SRS. This is a potential gain of $1,071 + $612 = $1,683.

Therefore, i would only ever not put money in SRS if i am certain that with the remaining S$14,229, i can bring in returns higher than $1,683, or about ~12%.

Any thoughts on the above?

Erm, it's only a 1 time return of 7% based on your example, rather than 7% annually (which would be very impressive when compounded).

Also, note that the gains of your SRS investments are subject to income tax upon subsequent withdrawal (as compared to if you were to invest via cash). This can be mitigated by ensuring you have minimal chargeable income upon commencing your SRS withdrawal, so that you are taxed 0% for the first $40k per annum, assuming tax/SRS rules stay the same. Might be a problem if you top up a lot into SRS and make considerable gains via SRS investments (happy problem ).

 

[JetStorm]

Is this assumption correct? For SRS, assuming retire at age 62. Start withdrawing at age 63.

Working backwards... at age 36 can start to contribute 15.3k to srs so as you won't get taxed when withdraw the 40k per year for 10 years from age 63 onwards?

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

 

[hwmook]

Is this assumption correct? For SRS, assuming retire at age 62. Start withdrawing at age 63.

Working backwards... at age 36 can start to contribute 15.3k to srs so as you won't get taxed when withdraw the 40k per year for 10 years from age 63 onwards?

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

What are you doing with the money in SRS? Keep in bank to earn 0.05% interest?

 

[Mecisteus]

SRS has very poor options to invest your money in.

You may save on taxes but you may waste on other better investment opportunities.

 

[SBC]

I am skipping SRS top up for this year.

Still hoping to grow my SRS fund to 200k by 62.

 

[JuniorLion]

SRS has very poor options to invest your money in.

You may save on taxes but you may waste on other better investment opportunities.

Ermm.. quite a lot of options actually.

But subjective.

 

[maple96]

Ermm.. quite a lot of options actually.

But subjective.

That's right. Savvy investors should not make noise. SRS is still cash. I doubled my money in one stock during the last bull run, hit and run

Now cannot take too much volatility, put the money in endowment plan earning 4% pa compounded, I am happy to wait for maturity to enjoy the retirement fund tax free, no need be greedy

 

[Panerex]

That's right. Savvy investors should not make noise. SRS is still cash. I doubled my money in one stock during the last bull run, hit and run

Now cannot take too much volatility, put the money in endowment plan earning 4% pa compounded, I am happy to wait for maturity to enjoy the retirement fund tax free, no need be greedy

May I know which endowment plan is this?
4% guaranteed?

 

[hwmook]

Ermm.. quite a lot of options actually.

But subjective.

A lot of very poor options. I can't use it to invest in the stocks I want. The best options are all unavailable so you are stuck with the poor options. You are forced to pay additional fees to invest in mutual funds, ETFs so you save taxes and hand over to these fund managers so why bother about SRS unless your tax rate is really high or you are fast approaching 62.

 

[hwmook]

That's right. Savvy investors should not make noise. SRS is still cash. I doubled my money in one stock during the last bull run, hit and run

Now cannot take too much volatility, put the money in endowment plan earning 4% pa compounded, I am happy to wait for maturity to enjoy the retirement fund tax free, no need be greedy

My biggest win in stock is AMD, >2000%, cannot use SRS. SRS is not cash, you are stuck with scraps. You say you are savvy investors but still stuck with SRS, it's an oxymoron. Savvy investors won't even bother with SRS.

 

[CCPie]

Think it's ok for those near retirement or if income cap liao.

 

[Perisher]

Try Endowus for srs, some of the few good options.

 

[maple96]

My biggest win in stock is AMD, >2000%, cannot use SRS. SRS is not cash, you are stuck with scraps. You say you are savvy investors but still stuck with SRS, it's an oxymoron. Savvy investors won't even bother with SRS.

U fail your comprehension and interpreting skills badly

I am not savvy, so am happy just with 4% pa almost guaranteed returns, not greedy with my retirement funds.

If u are savvy, u should not be making noise here cos u are not in it!

To each his own!