SRS Portfolio

[TehSi99]

I just deposited some funds into SRS, for 2024 tax relief must wait until 01 jan to use for investment or now before 31 Dec can use?

I think deployment for investment has nothing to do with tax relief. Only top up to SRS has to do tax relief. If you top up to SRS this year, your assessment for FY2023 will somewhere 1Q 2024.

Someone correct me if I am wrong.

 

[fr33d0m]

If govt create a vehicle for all to be profitable, nobody wants to work.

it always favors the ones knowing how to utilize it. every vehicle has its own use, or it would not last.

 

[sgmegadeals]

Thanks

 

[Nesplex]

I suggest MBH and/or (ES3 or G3B) in most cases. These ETFs are reasonably low cost and reasonable choices for SRS dollars assuming you’re planning to retire in Singapore. Outside your SRS account I’d focus on a low cost global stock index fund such as IWDA, VWRA, or ISAC.

S27 has some tax issues for most people. It’s subject to 30% dividend withholding tax and is U.S. estate taxable. It’s possibly a good fit for U.S. persons with SRS accounts, but there aren’t many such people.

May I ask why do you not suggest 100% low-cost global stock index fund i.e., even with SRS dollars? If a person's runway to retirement is long enough, it should be quite favourable for him to do this rather than local bonds or stock ETF, no?

 

[BBCWatcher]

May I ask why do you not suggest 100% low-cost global stock index fund i.e., even with SRS dollars?

It simply costs more to invest in a global stock index fund using SRS dollars than it does using cash. Thus for cost efficiency you should use your cash savings first to invest in a low cost global stock index fund. If you still want even more of a global stock index fund then OK, use SRS dollars next.

MBH and ES3/G3B can be purchased using SRS dollars for about the same cost (or maybe exactly the same cost) as using unrestricted cash.

If a person's runway to retirement is long enough, it should be quite favourable for him to do this rather than local bonds or stock ETF, no?

That's a portfolio allocation decision, really. If you don't want to hold MBH, ES3, or G3B — or want to hold less — OK.

 

[gold_eagle36]

It simply costs more to invest in a global stock index fund using SRS dollars than it does using cash. Thus for cost efficiency you should use your cash savings first to invest in a low cost global stock index fund. If you still want even more of a global stock index fund then OK, use SRS dollars next.

MBH and ES3/G3B can be purchased using SRS dollars for about the same cost (or maybe exactly the same cost) as using unrestricted cash.

That's a portfolio allocation decision, really. If you don't want to hold MBH, ES3, or G3B — or want to hold less — OK.

Well thats assuming both srs and cash pool are funds you won't want to touch until 62 63. Otherwise, it's better to invest srs in equities if you are younger as you would rather have your liquid cash taking less risk with some bonds. And can afford for srs portfolio to take more volatility as they are for the long term.

Just like for CPFIS. If you want to invest I suggest full 100% equities and hold more liquid cash or bonds.

I believe this strategy is better for most people, as not everyone has tons of cash. The benefits outweigh the extra cost.

 

[BBCWatcher]

Well thats assuming both srs and cash pool are funds you won't want to touch until 62 63. Otherwise, it's better to invest srs in equities if you are younger as you would rather have your liquid cash taking less risk with some bonds.

That doesn't make any sense to me. If the savings are long-term they're long-term. Whether or not there's a SRS "wrapper" around them. Also, for (further) tax optimization reasons it makes much more sense to hold your expected lower yielding assets within the SRS account.

If you want to sell some bonds (a bond fund) before retirement, no problem! Let's suppose you want to raise $5,000 and that you're holding only a stock fund outside your SRS account and only a bond fund inside your SRS account. Sell $5,000 of your stock fund, then exchange $5,000 of your bond fund for $5,000 worth of a stock fund inside your SRS account. Your overall portfolio is thus -$5,000 in bonds and +/-$0 in stocks, and you have your $5,000 of cash to spend.

 

[chopra]

hi, there are blogs such as investment moat suggesting that SRS is not cost effective given “But in truth, the savings on taxes today, deferring the tax payment so that you will only be taxed 50% of what you have in the future, may not result in a significant difference.”

i did a check based on a few big assumptions (12% tax bracket, 10% investment yield, 50yo now, 62yo stop srs, 63yo start withdrawal, 68yo retire). did this using hp, so e spreadsheet is abit off. my conclusion is that at 50yo, it is cost effective to invest in srs.

@dork32
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[fr33d0m]

10% investment yield, LOL.

In the next 10 years, it is more likely we have a recession than we have no recession.

 

[TehSi99]

hi, there are blogs such as investment moat suggesting that SRS is not cost effective given “But in truth, the savings on taxes today, deferring the tax payment so that you will only be taxed 50% of what you have in the future, may not result in a significant difference.”

i did a check based on a few big assumptions (12% tax bracket, 10% investment yield, 50yo now, 62yo stop srs, 63yo start withdrawal, 68yo retire). did this using hp, so e spreadsheet is abit off. my conclusion is that at 50yo, it is cost effective to invest in srs.

@dork32
@limster

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10% return yearly is not easy.

 

[chopra]

the focus is not on 10%. i can adjust down and the conclusion will be e same


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[gold_eagle36]

That doesn't make any sense to me. If the savings are long-term they're long-term. Whether or not there's a SRS "wrapper" around them. Also, for (further) tax optimization reasons it makes much more sense to hold your expected lower yielding assets within the SRS account.

If you want to sell some bonds (a bond fund) before retirement, no problem! Let's suppose you want to raise $5,000 and that you're holding only a stock fund outside your SRS account and only a bond fund inside your SRS account. Sell $5,000 of your stock fund, then exchange $5,000 of your bond fund for $5,000 worth of a stock fund inside your SRS account. Your overall portfolio is thus -$5,000 in bonds and +/-$0 in stocks, and you have your $5,000 of cash to spend.

If u have 200k cpf 50k cash 50k srs, after allocating for emergency

How would u allocate? Ur idea is good if people are cash rich then it won't make a difference but many investors have much more in cpf and SRS ( if they have been contributing)

Imagine your cash all in equities. It drawdown 50% black swan event.
50k goes to 25k

You actually need 30k or 40k liquidity now, your selling stocks here and switching it into srs at this point will not work. The drawdown already wreak your short term liquidity.

I end my opinion here. Thanks.

 

[yiron]

the focus is not on 10%. i can adjust down and the conclusion will be e same


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A lower annual actually makes SRS' deferred tax treatment more attractive.
The problem is if you get huge returns on your SRS investments, the dividends / coupons / capital gains will be taxable subsequently (as compared to cash investments).

SRS Pro: defer tax at marginal tax rate, pay tax on SRS withdrawal with 50% exempted after retirement age (optimally when u have zero chargeable income)
SRS Con: penalty for early withdrawal, investment gains on SRS is taxable, only 10 years for withdrawal (which could be problematic for those with big SRS balance well above $400k)

 

[Nofear40]

Is there anyone using SRS to buy bank stocks? With interest rates coming down, the risk-free options (eg T bill) may become unattractive over time. Looking to the next more stable instrument to deploy my SRS

 

[chopra]

A lower annual actually makes SRS' deferred tax treatment more attractive.
The problem is if you get huge returns on your SRS investments, the dividends / coupons / capital gains will be taxable subsequently (as compared to cash investments).
SRS Pro: defer tax at marginal tax rate, pay tax on SRS withdrawal with 50% exempted after retirement age (optimally when u have zero chargeable income)
SRS Con: penalty for early withdrawal, investment gains on SRS is taxable, only 10 years for withdrawal (which could be problematic for those with big SRS balance well above $400k)

so I simulated $10k per year investment, 50yo start, 1-10% gain. SRS WILL BE a good move.



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[fr33d0m]

A lower annual actually makes SRS' deferred tax treatment more attractive.
The problem is if you get huge returns on your SRS investments, the dividends / coupons / capital gains will be taxable subsequently (as compared to cash investments).

SRS Pro: defer tax at marginal tax rate, pay tax on SRS withdrawal with 50% exempted after retirement age (optimally when u have zero chargeable income)
SRS Con: penalty for early withdrawal, investment gains on SRS is taxable, only 10 years for withdrawal (which could be problematic for those with big SRS balance well above $400k)

SRS is to supplement retirement, not for tax avoidance... tax is just incentive, not the aim....

 

[fr33d0m]

Is there anyone using SRS to buy bank stocks? With interest rates coming down, the risk-free options (eg T bill) may become unattractive over time. Looking to the next more stable instrument to deploy my SRS

just because the money is in SRS, it should not influence your overall deployment strategy. Most local should have more money in CPF than in SRS. SRS maybe forms 10 - 20% of your overall financial position. I don't believe that such little money impacts your investment decision so much...

Liquidity is highly overrated today with so many means to get liquidity. You can get interest-free money from credit card or worse pay a low processing fee, or borrow from relatives, friends or the banks.

 

[Nofear40]

just because the money is in SRS, it should not influence your overall deployment strategy. Most local should have more money in CPF than in SRS. SRS maybe forms 10 - 20% of your overall financial position. I don't believe that such little money impacts your investment decision so much...

Liquidity is highly overrated today with so many means to get liquidity. You can get interest-free money from credit card or worse pay a low processing fee, or borrow from relatives, friends or the banks.

I am a low risk person. My runway is not long, and I do not have any relatives to borrow from. Usually, I do not want to get into financial matters with friends as this will have an adverse impact on relationships.
But every individual is different.
Just go with an investment portfolio that one is comfortable with.

 

[maumu]

A lower annual actually makes SRS' deferred tax treatment more attractive.
The problem is if you get huge returns on your SRS investments, the dividends / coupons / capital gains will be taxable subsequently (as compared to cash investments).

SRS Pro: defer tax at marginal tax rate, pay tax on SRS withdrawal with 50% exempted after retirement age (optimally when u have zero chargeable income)
SRS Con: penalty for early withdrawal, investment gains on SRS is taxable, only 10 years for withdrawal (which could be problematic for those with big SRS balance well above $400k)

if one has investments using SRS but does not have salary or any other income, it suffices to keep SRS portfolio value max at $400k to enjoy tax-free withdrawal.

however, I'm still trying to learn how does getting an annuity plan helps (such that the SRS portfolio may exceed $400k?) it sounds kinda complicated and I wonder if any experts here can share with an example or case study... will be much appreciated

 

[yiron]

SRS is to supplement retirement, not for tax avoidance... tax is just incentive, not the aim....

Of course SRS is for retirement planning. But without the tax incentive, why would anyone want to lock their money into SRS?