SRS Portfolio

[WHLN17]

I am aiming for 400k. That way, if spread over 10 years, each year take out 40k still can escape tax. I have started in my early 40s so 400k is achievable for me. I have since scaled back contributions due to 80k cap on tax deductible. My first full year of invest using SRS only generated 1.1k dividends. However, last year, my SRS portfolio generated 10.687k dividends. This year it is on course to generate about 12k. My total contribution so far is 128k and it has grow to slightly above 200k now. I still have slightly more than 10 years to go before hitting 62. So the accumulated dividends and fresh contribution should hit 400k by age 62. If God willing.

I have sold some reit holdings shortly after the above post and now, my SRS value already hitting close to $600k. Mainly thanks to Centurion and Boustead and I still have 9 years before hitting 62. Dividend yield on cost alone is close to 10% and my potential enemy is market crash. Typically, if market crash, easily 20 to 30% of account value will be gone. If there is market crash within next 18 months, I would have no long run way to recover unless it is a V shape recovery. I am in a dilemma whether to continue growing the account or liquidate everything and sit on cash till age 62. The withdrawal also attract higher income tax with higher amount though this is a 'happy' problem and $1m SRS account seems a nice number. Just have to let it out of my chest and wish to see what others think.

 

[BBCWatcher]

The withdrawal also attract higher income tax with higher amount though this is a 'happy' problem and $1m SRS account seems a nice number.

$1M would be ~$100,000 per year in SRS withdrawals. The effective income tax rate on those withdrawals (assuming no other taxable income, no reliefs, and no tax bracket changes) would be only 2.5%.

You're allowed to withdraw securities "in kind" from a SRS account. So really the only question is whether you have the investments you want within your total household portfolio. Decide that question first, then (if otherwise reasonable) hold the lowest expected yielding assets within your SRS account.

 

[highsulphur]

$1M would be ~$100,000 per year in SRS withdrawals. The effective income tax rate on those withdrawals (assuming no other taxable income, no reliefs, and no tax bracket changes) would be only 2.5%.

You're allowed to withdraw securities "in kind" from a SRS account. So really the only question is whether you have the investments you want within your total household portfolio. Decide that question first, then (if otherwise reasonable) hold the lowest expected yielding assets within your SRS account.

Should be less than 2.5% since only 50% of the 100k is taxable right?

 

[BBCWatcher]

Should be less than 2.5% since only 50% of the 100k is taxable right?

I’ve already accounted for that.

 

[highsulphur]

I’ve already accounted for that.

a 100k withdrawal that has 50k taxable only attracts $1250 of income tax (1.25% tax rate).

https://www.iras.gov.sg/taxes/indiv...ncy-and-tax-rates/individual-income-tax-rates

 

[BBCWatcher]

a 100k withdrawal that has 50k taxable only attracts $1250 of income tax (1.25% tax rate).

Well, I thought I did.

Yes, I agree — thanks. For perspective, if the SRS investments really are growing at 10% per year then an effective tax rate of 1.25% is equivalent to only about 45 days of investment growth.

 

[alanchia67]

Sorry to hi-jack. When you redeem and the returns are back to SRS, how do we transfer it out to our bank account?

 

[highsulphur]

Sorry to hi-jack. When you redeem and the returns are back to SRS, how do we transfer it out to our bank account?

Are you above the withdrawal age?

 

[alanchia67]

Are you above the withdrawal age?

Not yet, just asking what's the process. Will be in just couple of years.

 

[JetStorm]

I have sold some reit holdings shortly after the above post and now, my SRS value already hitting close to $600k. Mainly thanks to Centurion and Boustead and I still have 9 years before hitting 62. Dividend yield on cost alone is close to 10% and my potential enemy is market crash. Typically, if market crash, easily 20 to 30% of account value will be gone. If there is market crash within next 18 months, I would have no long run way to recover unless it is a V shape recovery. I am in a dilemma whether to continue growing the account or liquidate everything and sit on cash till age 62. The withdrawal also attract higher income tax with higher amount though this is a 'happy' problem and $1m SRS account seems a nice number. Just have to let it out of my chest and wish to see what others think.

If like that I will just play it super safe now. SSBs... Bonds... anything that is capital protected.

 

[WHLN17]

I am none the wiser and I guess that's the characteristic of shares investment. We want to participate in the market yet afraid of market crashes, especially when our runway is no longer long. Thanks all for your views. Perhaps going forward will simply channel the dividends to the like of SSBs and corporate bonds instead of reinvesting them back into existing holdings.

 

[BBCWatcher]

I am none the wiser and I guess that's the characteristic of shares investment. We want to participate in the market yet afraid of market crashes, especially when our runway is no longer long. Thanks all for your views. Perhaps going forward will simply channel the dividends to the like of SSBs and corporate bonds instead of reinvesting them back into existing holdings.

Your runway isn’t actually your SRS withdrawal window. That’s only how/when the income tax on an SRS account is computed, not anything having to do with when you (or even your heirs) need to spend down those particular assets on food, clothing, haircuts, diapers, and medical services (as examples of real goods and services). Don’t overinterpret what an SRS account is. IRAS does not require you to spend SRS assets.

“Should I hold more, fewer, or about the same percentage of total assets in stocks?” is a question you should answer only based on total assets, inclusive of your SRS account. The fact some assets happen to be held in an SRS account is immaterial in assessing whether your overall risk posture is appropriate or not.

By the way, I don’t think holding SSBs in an SRS account makes much sense, not generally anyway. Part of the appeal of SSBs is that they’re liquid every month with guaranteed principal. But that’s not a useful feature for long-term assets, and SRS accounts are inherently long term (even if you are approaching your first withdrawal year). Also, SSB holdings are limited to $200,000 per person (plus inherited SSBs). If that limit is constraining then spending part of the limit within an SRS account seems strange.

 

[xorionn]

Any bonds to reco for SRS?

 

[sellbuyboy]

if every year got interests of 1.4k in SRS -> how to use invest them huh

 

[highsulphur]

if every year got interests of 1.4k in SRS -> how to use invest them huh

Reinvest to where you are getting them from

 

[sellbuyboy]

Reinvest to where you are getting them from

if from SSB how?

 

[BBCWatcher]

if from SSB how?

Buy more SSBs if you wish. S$502 at a time if you wish (inclusive of the transaction fee).

 

[sellbuyboy]

Buy more SSBs if you wish. S$502 at a time if you wish (inclusive of the transaction fee).

does buying $502 at a time make sense?

 

[BBCWatcher]

does buying $502 at a time make sense?

You’re asking someone who generally doesn’t like any SSBs within SRS accounts. However, buying SSBs S$502 at a time at least makes more sense (nearly always) than keeping cash in an SRS account to earn 0.05% interest.

 

[WHLN17]

I have sold some reit holdings shortly after the above post and now, my SRS value already hitting close to $600k. Mainly thanks to Centurion and Boustead and I still have 9 years before hitting 62. Dividend yield on cost alone is close to 10% and my potential enemy is market crash. Typically, if market crash, easily 20 to 30% of account value will be gone. If there is market crash within next 18 months, I would have no long run way to recover unless it is a V shape recovery. I am in a dilemma whether to continue growing the account or liquidate everything and sit on cash till age 62. The withdrawal also attract higher income tax with higher amount though this is a 'happy' problem and $1m SRS account seems a nice number. Just have to let it out of my chest and wish to see what others think.

As an example, Centurion 'crashed' almost 7% the very next market day after I posted this though it has recovered since somewhat. A 7% declined in a $600000 portfolio is $42000 and a 20% would wipe out $120000. I really have to think hard what's the next step. It would be a disaster if market crash right after ceasing of employment income and whether the assets are in SRS or CDP all will be affected. If market crash now or within next few years, even though in theory we can leave SRS untouched for about 20 years [defer withdrawal from 62 to 72 and withdraw it over 10 years] for recovery but not sure whether it is a wise thing to do.