Pushing the limits with SRS

Pushing the limits with SRS

The SRS is a powerful tool that can help you build strong retirement savings. If you’ve heard about it, you would probably know it offers:

  • Lower taxable income
    Deposit up to S$15,300 a year to shed it off your taxable income (S$35,700 for foreigners)
  • No lock-in
    It’s voluntary: contributions aren’t locked in*

    *Not locked in, but no free lunch: If you withdraw before your retirement age, you’ll have to pay full income tax, and a 5% early withdrawal penalty.

  • Others
    Take weight off your shoulders with a 50% tax concession when you withdraw after the retirement age

You can learn more or apply for an account here.

Pump up your SRS returns

Parking funds inside your SRS account is like sitting around in a gym. You’ll be earning a 0.05% deposit rate, which may not be enough to outmuscle inflation.

To better prepare for retirement, work your SRS savings harder. You can channel them into a variety of assets and investments, from stocks to single premium insurance. They suit various preferences and your returns will potentially be higher than the deposit rate.

Whichever you choose, the returns will be tax-free – 100% of your gains go back into your SRS account.

Here are 5 assets and investments worth considering.

A simple, effective way to get started is with fixed deposits (FDs).

FDs offer higher interest as compared to traditional savings accounts. This is why many investors turn to foreign currency FDs instead, like Australian Dollar (AUD) and New Zealand Dollar (NZD) FDs.

Rates used are hypothetical and based on recent rates.

What you should know

Before getting into FDs, consider if the deposits will be worth more, or less, when converted back to SGD (your home or base currency) at maturity. This happens because currency rates change. Learn how you could gain from such changes here.

With its relative safety and regular dividends, bonds can help to build up your funds in the long term.

By buying them, you’re lending money to the government or a corporate borrower. That being the case, you’ll know what to expect throughout the duration of your investment.

Types of bond-related investments

Retail bonds

Traded on the Singapore Exchange (SGX), typically in minimum trade sizes of 1,000 units. Interest rates are usually fixed.

Bond unit trusts or exchange traded funds (ETFs)

An investment manager invests your money in bonds for you. Returns may vary over time.

Singapore Savings Bonds

Issued by the Singapore government, they can be purchased for as little as S$500. Interest increases at a known rate.

Regardless of which you choose, you’ll be able to get your returns up to speed predictably with regular income.

These are quick ways to set up a portfolio that’s managed by expert professionals. Depending on your needs, you can choose one that’s actively-managed (unit trusts) or passively-managed (ETFs).

Put together by professional fund managers, both offer diversification for relatively small amounts by pooling your money with that of other investors.

With unit trusts (also known as funds), managers select stocks and bonds with the aim of outperforming their benchmark.

ETFs meanwhile buy securities to copy a specific market index such as Singapore’s Straits Times Index. Hence, their costs are generally lower.

What you should know: Get cues on how else these two differ here.

If you’re prepared to go all out and accept a certain level of risk, consider stocks.

Buying them lets you own a part of a business. You’ll share in its profits through dividends, and its growth through stock price gains. While stock prices may be affected when the business is going through a rough patch, shares have still been the best performing of the major asset classes over the long term.

What you should know

Before buying, it’s important to do your research or get proper advice. Check out the stocks’ balance sheet strength, earnings outlook and valuations. It’s also a good idea to get a grip on how to spot undervalued stocks, which offer great value.

If you’re considering real estate investment trusts (REITs), look at the quality of the properties under their care as well as the dividend yield.

For those who want the assurance of continuing income, a one-time payment into a single-premium insurance policy could be all that’s needed. You can purchase these from most banks using your SRS funds.

How Single Premium Insurance works

Other SRS benefits

Your SRS account also offers other benefits that could be useful as you get yourself into a healthy financial position.

Withdraw funds any time you need to

5% early withdrawal penalty applies if you withdraw before the legal retirement age.

Amount withdrawn is included as part of your taxable income.

50% tax concession on withdrawals after the legal retirement age

You can minimise the amount of tax paid. Only 50% of withdrawals will be taxed at the prevailing tax rate after you reach the legal retirement age.

By withdrawing S$40,000 each year, only S$20,000 is included as taxable income. If you have no other taxable income, you do not have to pay income tax.

Potentially lower your after-retirement tax even more

You can spread withdrawals over 10 years, taking only what you need as income. This could help you to move down income brackets and minimise taxes even further.

Explore getting your SRS account into healthier shape. Not only are there many good reasons to save with SRS, there are also many good ways to make your SRS savings work harder for you.

Disclaimers and Important Notices

Singapore dollar deposits of non-bank depositors and monies and deposits denominated in Singapore dollars under the Supplementary Retirement Scheme are insured by the Singapore Deposit Insurance Corporation, for up to S$75,000 in aggregate per depositor per Scheme member by law. Monies and deposits denominated in Singapore dollars under the CPF Investment Scheme and CPF Retirement Sum Scheme are aggregated and separately insured up to S$75,000 for each depositor per Scheme member. Foreign currency deposits, dual currency investments, structured deposits and other investment products are not insured.

Thank you. Your feedback will help us serve you better.

Was this information useful?

That's great to hear. Anything you'd like to add?
We're sorry to hear that. How can we do better?
Enter only letters, numbers or @!$-(),.