Your Views on SRS

[Okenba]

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.

It depends on the purpose of SRS. I don't think it is meant for young workers to save on tax. More an instrument to encourage people to save more for their retirement. Which is first served by CPF anyway.
(Making it too enticing ends up taxing the government instead due to lower taxes being paid. So a balance needs to be struck.)

So in a way, I guess it is targeting those who have maxed out FRS, but still feel that is insufficient for retirement. In other words, these folks have high monthly expenditure over and above what CPF Life would pay them, and likely have high monthly income as well.

So if they contribute when tax rate is 11.5% (Not too high. I'm sure many who contribute are higher), then the full sum of $15,300 would have saved them $1,759 in taxes.

Now, because by the time they draw out SRS, it is likely they are not working, and with the 50% discount, even if they draw out $80,000 (>5x of $15,300...) from SRS, they would only be paying $550 in tax.

 

[Perfect1onist]

Does it matter which bank I open my srs account with? Eg cost, rates, special benefits ,etc?

 

[lzydata]

Does it matter which bank I open my srs account with? Eg cost, rates, special benefits ,etc?

Currently I believe there are no promotions for opening new SRS accounts and all 3 banks have waived their SRS account-related fees and charges. There are only some CDP fees and $2 for applying for or redeeming SSB.

As for benefits, as far as I know, only UOB out of the 3 offers gold products, if that's your thing. Otherwise opening the account with your main bank is the most convenient.

 

[compro_1975]

hi gurus, i have a qn... i would want to save till 400k @ 62 yo and yearly withdraw 40k of which 20k is taxable but because is 20k i wont be taxed as per today's context... but if at 62yo i take 40k out from srs and still continue to work, is it i have to add my 50k yearly income to the 20k i withdraw from srs which will then be my annual income? or 20k i wont be taxed and my taxes will be on the 50k employment income?

 

[SBC]

Not easy to accumulate 400k in SRS.

Mine is only 100k plus.

 

[reddevil0728]

hi gurus, i have a qn... i would want to save till 400k @ 62 yo and yearly withdraw 40k of which 20k is taxable but because is 20k i wont be taxed as per today's context... but if at 62yo i take 40k out from srs and still continue to work, is it i have to add my 50k yearly income to the 20k i withdraw from srs which will then be my annual income? or 20k i wont be taxed and my taxes will be on the 50k employment income?

have you maxed out your 7k sa top-up yearly?

 

[BBCWatcher]

You’re not required to start withdrawing from a SRS account at age 62, and why would you if you’re still working, earning an income, and would pay more tax on the withdrawal?

 

[maumu]

You’re not required to start withdrawing from a SRS account at age 62, and why would you if you’re still working, earning an income, and would pay more tax on the withdrawal?

not sure but is it because the later we draw out the more we have to draw each time (hence above the tax relief bracket)? assuming we have accumulated 400k liao.

or is it that say if we start drawing at 70 we can collect last round at 80? am not very clear about the policy since still very far away...

 

[Okenba]

hi gurus, i have a qn... i would want to save till 400k @ 62 yo and yearly withdraw 40k of which 20k is taxable but because is 20k i wont be taxed as per today's context... but if at 62yo i take 40k out from srs and still continue to work, is it i have to add my 50k yearly income to the 20k i withdraw from srs which will then be my annual income? or 20k i wont be taxed and my taxes will be on the 50k employment income?

it stacks. So yes, you pay tax for 70k of income.
So either stop working if your work income is low, or delay SRS withdrawal until you are not working... Really depends on the individual situation...

 

[Okenba]

not sure but is it because the later we draw out the more we have to draw each time (hence above the tax relief bracket)? assuming we have accumulated 400k liao.

or is it that say if we start drawing at 70 we can collect last round at 80? am not very clear about the policy since still very far away...

i think ppl are too fixated on 400k.
yes, if you withdraw 40k each year, you pay $0 in tax.
If you withdraw 60k each year, you pay $200 in tax.
You withdraw 80k each year, you pay $550 in tax.

Seriously, I would be very happy for my SRS to overshoot 400k...

 

[BBCWatcher]

or is it that say if we start drawing at 70 we can collect last round at 80? am not very clear about the policy since still very far away...

Once you start qualified withdrawals you have a 10 year period to complete them. For example, if you start withdrawing in 2041, 2050 is the final withdrawal year. Any funds left in this SRS account on January 1, 2051, are "deemed withdrawn" in 2050 and taxed as if withdrawn in 2050. You cannot pause the 10 year period: once it starts, it runs to completion.

Yes, you can start qualified withdrawals at any age you wish. It doesn't have to be age 62. If you work until age 66 and start withdrawals at age 68 (for example), that's perfectly fine.

There is only one exception to the 10 year qualified withdrawal period: if you buy a fully SRS qualified single premium life annuity. The only life insurance company that currently sells this type of annuity is Manulife. These annuity payouts are taxed as they're paid, even beyond the 10 year withdrawal window.

i think ppl are too fixated on 400k.
yes, if you withdraw 40k each year, you pay $0 in tax.
If you withdraw 60k each year, you pay $200 in tax.
You withdraw 80k each year, you pay $550 in tax.
Seriously, I would be very happy for my SRS to overshoot 400k...

Agreed. It's certainly not the end of the world if your SRS account withdrawals exceed $40,000/year. For one thing you might have other taxable income anyway, such as rental income, that would require some income tax due on the $40,000. You also have the possible life annuity option via Manulife if your SRS account ends up gigantic.

 

[maumu]

Once you start qualified withdrawals you have a 10 year period to complete them. For example, if you start withdrawing in 2041, 2050 is the final withdrawal year. Any funds left in this SRS account on January 1, 2051, are "deemed withdrawn" in 2050 and taxed as if withdrawn in 2050. You cannot pause the 10 year period: once it starts, it runs to completion.

...

There is only one exception to the 10 year qualified withdrawal period: if you buy a fully SRS qualified single premium life annuity. The only life insurance company that currently sells this type of annuity is Manulife. These annuity payouts are taxed as they're paid, even beyond the 10 year withdrawal window.

...

Agreed. It's certainly not the end of the world if your SRS account withdrawals exceed $40,000/year. For one thing you might have other taxable income anyway, such as rental income, that would require some income tax due on the $40,000. You also have the possible life annuity option via Manulife if your SRS account ends up gigantic.

thanks for the detailed explanation, which confirms my understanding.

i think some of us (or maybe, just me) just don't want to 'waste' the savings by paying back taxes to the govt, hence the $400k magic figure. of course it assumes we're not drawing other sources of income (e.g. rental).

is there any layman sites to learn more about annuity plans? have come across it but not exactly sure how it operates. it pays out like CPF Life?

 

[compro_1975]

have you maxed out your 7k sa top-up yearly?

hi, no intention to put money into CPF at least srs does not suka suka change rules, i trust srs more and invest the money into stocks

 

[reddevil0728]

hi, no intention to put money into CPF at least srs does not suka suka change rules, i trust srs more and invest the money into stocks

actually SRS is also government scheme. they can change the rules for SRS as easily as changing the rules for CPF

 

[compro_1975]

You’re not required to start withdrawing from a SRS account at age 62, and why would you if you’re still working, earning an income, and would pay more tax on the withdrawal?

thats is my qn, is it they will view the total withdrew + salary as income or if i only withdraw 40k yearly is seen seperately from my salary income? well ok dont talk about salary, but how about rental income? does it all add up together?

 

[compro_1975]

it stacks. So yes, you pay tax for 70k of income.
So either stop working if your work income is low, or delay SRS withdrawal until you are not working... Really depends on the individual situation...

thanks!!!! waaa need lots of planning then

 

[treblers]

actually SRS is also government scheme. they can change the rules for SRS as easily as changing the rules for CPF

SRS withdrawal is already at 62 yo, while CPF starts at 55.

So it's probably less likely to face changes. Furthermore, CPF has higher guaranteed interest and it is a pooled scheme - imo higher risk of policy changes

 

[compro_1975]

Once you start qualified withdrawals you have a 10 year period to complete them. For example, if you start withdrawing in 2041, 2050 is the final withdrawal year. Any funds left in this SRS account on January 1, 2051, are "deemed withdrawn" in 2050 and taxed as if withdrawn in 2050. You cannot pause the 10 year period: once it starts, it runs to completion.

Yes, you can start qualified withdrawals at any age you wish. It doesn't have to be age 62. If you work until age 66 and start withdrawals at age 68 (for example), that's perfectly fine.

There is only one exception to the 10 year qualified withdrawal period: if you buy a fully SRS qualified single premium life annuity. The only life insurance company that currently sells this type of annuity is Manulife. These annuity payouts are taxed as they're paid, even beyond the 10 year withdrawal window.


Agreed. It's certainly not the end of the world if your SRS account withdrawals exceed $40,000/year. For one thing you might have other taxable income anyway, such as rental income, that would require some income tax due on the $40,000. You also have the possible life annuity option via Manulife if your SRS account ends up gigantic.

any good plans to intro? i shall google also~

 

[henrylbh]

Not a good scheme if your SRS balance far exceed 400k by the time you are able to take the money. It's also not a good scheme, if you were never into any investment before joining the scheme or you are bad in investing the money in your SRS. It's also not good if you are still have taxable income when you start drawing and sucks if the rates of tax go up by then.

 

[BBCWatcher]

any good plans to intro?

Manulife’s fully SRS qualified life annuity is currently called “Manulife RetireReady Plus II.” But only when you pay for it as a single premium (with SRS account funds), start payouts after your qualified withdrawal age, and choose lifetime payouts. This is currently the only way to stretch the effective SRS qualified withdrawal window beyond 10 years.