SRS withdrawals: Stagger and save

SRS withdrawals: Stagger and save

NAV TL;DR

If you don’t have time to read through the whole article, you can check out our short version below.

All you need to know about withdrawing your Supplementary Retirement Scheme (SRS) savings:

You can begin drawing down on your SRS savings on or after retirement, over 10 years.

If you withdraw before the retirement age, you will face a 5% withdrawal penalty on your withdrawal sum, except under certain conditions.

Consider spreading out your SRS withdrawals to save on taxes.

The Supplementary Retirement Scheme (SRS) is a voluntary scheme that can complement your Central Provident Fund savings. SRS contributions also help you lower your taxable income.

The tax angle can be viewed from three lenses:

  • Contributions receive dollar-to-dollar tax reliefs, capped at the annual contribution limit (S$15,300 for Singaporeans and Permanent Residents, and $37,500 for foreigners) and personal income tax relief of S$80,000
  • Investment gains, if left in your SRS account and not withdrawn, are tax-free
  • Withdrawals are subject to a 50% tax of the amount withdrawn, if made at or after the retirement age

As mentioned, you can begin drawing down on your SRS savings, penalty-free, upon retirement – defined as the statutory retirement age prevailing at the time you made your first SRS contribution.

However, do note that if you withdraw before the retirement age, you will face a 5% withdrawal penalty on your withdrawal sum, except under certain conditions, such as bankruptcy, illness, or death. Pre-retirement withdrawals must also be made in cash.

To lower your taxes, consider spreading out your SRS withdrawals, instead of fully drawing down what you have saved. You can withdraw over 10 years, and can determine your withdrawal amount.

As you would presumably have little to no income at retirement, you may end up paying little, if any, tax—if you start withdrawing from the retirement age.

You can potentially withdraw up to S$40,000 a year, tax-free, over 10 years, as the first S$20,000 of an individual’s chargeable income is not taxed. Note that the taxes will be payable in the following year after the withdrawals are made.

If you have more than S$400,000 in your SRS account, 50% of the remainder at the end of the withdrawal period will be taxed.

In comparison, if you had withdrawn the full S$400,000 at age 62, here is how much taxes you would have to pay:

Note that if you have bought an annuity that gives you a payout for life, 50% of the payouts withdrawn will also be subject to tax, but the annuity stream is not limited to 10 years.

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