Your Views on SRS

[linzw00]

i have been buying 1 time insurance plans for my srs for the past 4 times, thinking that the interest and power of compounding would be great.

but lately, i relook at the policy table and the work out the math on the financial calculator apps, noticed that the insurance policy tables are overstating their yields. eg: their project is on 3.25% or 4.75% but when i do the same returns on the financial calculator apps, the % is is way lower, to the amount of near FD rates.

i asked the agent what for i put 20yrs for FD rates? i might as well really put in FD and lock for 1 yr each.

 

[zumaba]

Is there any way to use SRS to invest on China ETF?

 

[BBCWatcher]

Is there any way to use SRS to invest on China ETF?

That's a bad idea in my view, but if you insist, yes, there is. There are a few China ETFs listed on the SGX, such as symbols JK8 (United SSE 50 China ETF) and TID (Xtrackers China UCITS ETF), both quoted/traded in Singapore dollars. TID looks like the best of a mediocre bunch at quick glance, but please do your own research.

 

[Dividends]

1. Yes
2. Max if needed, $15.3k
3. STI ETF
4. 2 years
5. About 31k
6. Topup SA

 

[tangent314]

but lately, i relook at the policy table and the work out the math on the financial calculator apps, noticed that the insurance policy tables are overstating their yields. eg: their project is on 3.25% or 4.75% but when i do the same returns on the financial calculator apps, the % is is way lower, to the amount of near FD rates.

3.25%/4.75% on the BI does not show the yield or a projection. There is always a message on the BI that explains that. What those figures show is what you will receive if the PAR fund achieves a performance of 3.25%/4.75%

Generally for endowment or retirement plans you will get an IRR of about 4% from a PAR fund performance of 4.75%

 

[linzw00]

3.25%/4.75% on the BI does not show the yield or a projection. There is always a message on the BI that explains that. What those figures show is what you will receive if the PAR fund achieves a performance of 3.25%/4.75%

Generally for endowment or retirement plans you will get an IRR of about 4% from a PAR fund performance of 4.75%

Ya, i get that now..

 

[SBC]

Ya, i get that now..

Should use the actual performance for insurance policy.

Hope to accumulate 300k on my total Cash Value for my policies by end of the year.

 

[GloryKnight]

How does one determine SRS contribution should be maxed out or not? Does it only depend on the current cashflow for the year? thanks!

 

[reddevil0728]

How does one determine SRS contribution should be maxed out or not? Does it only depend on the current cashflow for the year? thanks!

I think should look at topping up cpf first. Then consider SRS if you have excess cash.

 

[GloryKnight]

I think should look at topping up cpf first. Then consider SRS if you have excess cash.

Personally, I really dislike the idea of money being locked-up. So SRS seems like the "lesser evil" for me vs CPF top-ups because of the 99 year old thingy and other reasons.

I dont really believe in leaving alot in the CPF to my children as well in the future.

 

[reddevil0728]

Personally, I really dislike the idea of money being locked-up. So SRS seems like the "lesser evil" for me vs CPF top-ups because of the 99 year old thingy and other reasons.

I dont really believe in leaving alot in the CPF to my children as well in the future.

looking more at the 7k tax relief that is guaranteed.

Anything above then SRS might make sense.

 

[Okenba]

Personally, I really dislike the idea of money being locked-up. So SRS seems like the "lesser evil" for me vs CPF top-ups because of the 99 year old thingy and other reasons.

I dont really believe in leaving alot in the CPF to my children as well in the future.

Assuming your SA hits FRS, which if you are thinking of SRS seems likely...

Then CPF actually allows you to get your money back when you hit 55 (less FRS), rather than SRS which you can only touch without penalty when you it 62...

 

[celtosaxon]

Personally, I really dislike the idea of money being locked-up. So SRS seems like the "lesser evil" for me vs CPF top-ups because of the 99 year old thingy and other reasons.

I dont really believe in leaving alot in the CPF to my children as well in the future.

What is the 99 year old thingy?

You are missing out if you don’t focus on CPF first, especially to the extent you can get a tax deduction for doing so. You can unlock much of your CPF at 55, and with SA shielding it’s like getting a 4% high yield checking account that you can draw from anytime. Only CPF is triple tax advantaged - income deduction up front, tax free growth and tax free withdrawal... and you can’t beat the rates of interest.

SRS should be at the bottom of your list in terms of tax deduction opportunities. It really works best for those in mid-career and in a higher tax bracket. SRS is locked up until 62 and if you withdraw before that you pay full taxes and penalties. SRS earns almost 0% interest, and investment options are limited. When you use SRS you are basically “opting in” to be taxed on investment gains that would have been tax free outside SRS. This is why younger people could lose out if their investments grow “too much” over a long career. If you do not retire in Singapore, worse... the non-resident tax bracket of 15% or the resident tax bracket (whichever is higher) will apply on 50% of the withdrawn amounts.

 

[BBCWatcher]

....However, you can deposit $1 into a Supplementary Retirement Scheme account and thus lock in the age 62 qualified withdrawal age if you wish.

 

[celtosaxon]

....However, you can deposit $1 into a Supplementary Retirement Scheme account and thus lock in the age 62 qualified withdrawal age if you wish.

That’s a great point, for those early in their career, you can lock in age 62 by just getting the account started with $1 before the end of 2021.

For those who don’t do this, the age will rise to 63 in 2022 and continue to increase from there, eventually 65 by 2030.

 

[kumokumo]

To me, SRS is just locking your money up now so you can differ paying some of your taxes till age 62 at a discounted rate.
If you are 20-30 years away from turning 62, its has its risk.

Assuming you are 32 now, 30 years to 62 means you'll likely see at least 3 generations of Prime Ministers changing hands. How will the country look 30 years from now, no one can guess.

Will tax rates still be at the same level 30 years later? If taxes increase, will your discount rates go down?

Are you certain you can withdraw at 62, 30 years later. Laws, policies and even the government may change by then.

I think 20-30 years is a long commitment with many uncertainties. I would prefer to keep my cash where I can reach them anytime.

 

[BBCWatcher]

That’s a great point, for those early in their career, you can lock in age 62 by just getting the account started with $1 before the end of 2021.

Seedly.sg shows how easy it is to open a SRS account with $1 here (DBS/POSB in their example).

N.B. You shouldn't necessarily start withdrawals from your SRS account at age 62. However, opening the SRS account with $1 will currently (2020, 2021) fix the minimum qualified withdrawal age at 62, giving you that option.

 

[jayooi95]

My response:
1. Yes, although some sources say it's best to contribute to your SRS account after 40 years old for best tax benefits
2. Around S$10k
3. Buy REITs and blue chip stocks
4. Around 5 years
5. Around S$50k
6. Nothing additional at the moment
Useful resources for Supplementary Retirement Scheme (SRS) account are https://www.iras.gov.sg/IRASHome/Schemes/Individuals/Supplementary-Retirement-Scheme--SRS-/ and https://www.ocbc.com/personal-banking/investments/supplementary-retirement-scheme-account.

 

[bobby6679]

Any SRS sign up promotion?

 

[celtosaxon]

To me, SRS is just locking your money up now so you can differ paying some of your taxes till age 62 at a discounted rate.
If you are 20-30 years away from turning 62, its has its risk.

Assuming you are 32 now, 30 years to 62 means you'll likely see at least 3 generations of Prime Ministers changing hands. How will the country look 30 years from now, no one can guess.

Will tax rates still be at the same level 30 years later? If taxes increase, will your discount rates go down?

Are you certain you can withdraw at 62, 30 years later. Laws, policies and even the government may change by then.

I think 20-30 years is a long commitment with many uncertainties. I would prefer to keep my cash where I can reach them anytime.

There is some risk, but something like SRS cannot be easily discontinued or changed radically - people made the decision to contribute based on the current value proposition.

I could see SRS being enhanced in the future, because it is the 50% taxable rule that causes an imbalance for those early in their career - they are the ones who can more reasonably expect their investments to triple or quadruple over multiple decades. With the 50% tax rule, if your investments grow to more the double what you contributed, each additional dollar is now going to be subject to tax (that would not have been taxed outside SRS). That is the real and present deterrent for not wanting to invest in SRS for too long.