As an example, Centurion 'crashed' almost 7% the very next market day after I posted this though it has recovered since somewhat.
Even at -7% that's a correction, not a crash.
Individual stocks and REITs can crash to zero. That happens every day, somewhere. A global stock index cannot absent a/an historic catastrophe when you and everyone else would have much bigger problems. If you don't like individual stock or REIT volatility, don't hold individual stocks or REITs. Whether inside or outside an SRS account.
A 7% declined in a $600000 portfolio is $42000 and a 20% would wipe out $120000.
On paper, yes.
But is your total portfolio $600,000? It doesn't seem like it. That's just your approximate SRS account value, not your total portfolio. You should always assess your investment risk posture based on your total portfolio. Moreover, absolute numbers don't really matter. Elon Musk's net worth probably changed yesterday by billions in absolute terms, up or down. That doesn't really matter when your net worth is hundreds of billions and when a tiny fraction would keep you living in utter luxury.
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.
No, actually it wouldn't be a
disaster. You're not planning to spend 86% of your current net worth all on next Tuesday, are you? For example, at age 60, if you're in at least reasonably good health, you'd
plan to spend down your net worth over the course of 40+ years.
Yes, recent retirees have shorter personal time horizons than 25 year old early career employees. But their time horizons aren't
that short. Recent retirees still have a long way to go. It would not be surprising if a recent retiree has a total investment portfolio consisting of 60% stocks (in one or a couple low cost stock index funds) and 40% in bonds. And maybe they gradually adjust to a 50-50 split over the first 10 years of retirement. As an example.
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.
Don't look at your SRS account in isolation! Look at your total assets. Is the risk profile
of your total assets appropriate or not? That's the (only) risk question, not what's happening within an individual account within your total portfolio.
Oddly enough if your SRS account happens to fall in value (or at least not rise as much) that's a
good thing from an income tax point of view, if your SRS account has a total value >S$400,000.
So let's recap....
1. Assess (and periodically reasssess) portfolio risk based only on your total portfolio, not on any individual account within your portfolio. If for example you're in your 60s and have 90% of your total assets in stocks/REITs and 10% in bonds, maybe that's too aggressive. (Unless your net worth is quite high and you're working on dynastic wealth accumulation and/or long-term philanthropy.)
2. Once you've decided on a reasonable portfolio risk posture, the assets (typically bonds) that you expect to be your lowest yielding assets should be held inside your SRS account first. This is for tax optimization reasons, a separate decision that you take after Step #1. However, if you're satisfied with your current total portfolio risk posture then you could sell higher expected yielding assets within your SRS account to buy lower expected yielding assets (trade stocks for bonds), then make a compensating trade outside your SRS account (sell bonds and buy stocks) to keep your total portfolio in the same risk posture.
think in general the rule of thumb is always that the longer the runway the higher the risk one can take.
Generally yes, but there are notable exceptions.
don't play with retirement money if you're just a few years away from it. it's not worth 'waiting' for things to recover or break even in the midst of a downturn... would be better off putting money inside tin can.
But trying to evaluate one's current investment risk posture solely by looking at assets that happen to be inside an SRS account is misguided. Always evaluate one's risk posture based on total asset holdings.
When you start withdrawing from an SRS account you have the choice to withdraw assets "in kind" (not to sell them, but merely to transfer them across the SRS account boundary) or to sell them to raise cash, as you prefer. SRS withdrawals do NOT require forced sales of assets. (And even if they did you could sell then quickly repurchase the same assets if you wanted to.) In other words, SRS account withdrawals have no inherent impact on your portfolio's risk posture. You're not required to spend SRS account withdrawals on food, clothing, medical services, or any other real goods or services. You're not even required to liquidate investment positions. It's just a tax computation (which could be $0) over the course of 10 consecutive calendar years whenever you decide to start that tax computation. That's ALL it is, nothing more.
anyway based on current policies, since 50% of withdrawals are taxable over the 10 year period I recall the max we should keep inside SRS is $400k? something like that..
No, not correct.
Yes,
after you've decided on your overall portfolio risk posture it makes tax optimization sense to hold your lowest expected yielding assets inside your SRS account. That much is true. But paying a bit of income tax on SRS account withdrawals is not a bad thing. You can still come out way ahead if (for example) your SRS contributions are made while you're in the 22% tax bracket, even if you do end up paying a bit of income tax later on. If you're getting decent or better tax relief up front, that's still a win. Better is still better when best is unavailable.
To use an analogy, if you walk into an Apple store (a real one) and see brand new, sealed iPhone 16s (the current model as I write this) with these weird prices:
- S$100 each for the first 3
- S$200 each for the next 3
- Apple's current list price after the first 6
would you stop buying iPhones after the first 3? No, of course not! You'd buy all 6 iPhones that are weirdly heavily discounted. Assuming you have the cash (or can raise the cash even at fairly unreasonable cost) to do it. Who cares whether the second batch of iPhones costs more than the first batch? The first 6 are all fantastically low priced, so you'd gobble them all up. Then go resell them on Carousell or whatever.
I also wonder if DBS or OCBC (the other two possible SRS account custodians) would run things a bit differently.