I’m sure most of us have imagined what life during retirement would be like, and it probably looks something like this: travelling the world with your partner, picking up new hobbies, starting passion projects, and the list goes on. Sorry to burst your bubble, but unless you’ve saved up a more-than-significant amount, such a lifestyle is going to be difficult to maintain without a steady flow of income. It’s not impossible though; here’s how the Supplementary Retirement Scheme can give you great tax savings, and in turn help you boost your golden years.
What is an SRS account?
The Supplementary Retirement Scheme (SRS) is part of the Singapore Government’s multi-pronged approach to ensuring our financial needs are met, even when we’re old and grey. We all know about the existence of our CPF savings, but if you want a more cushy lifestyle during retirement, your CPF might not be enough. CPF savings are involuntary and are aimed at ensuring your basic needs such as housing and medical care are met. However, if you want a more cushy lifestyle, relying solely on your CPF savings might not be such a great idea. The SRS is a voluntary scheme that complements the CPF to encourage Singaporeans to save more for retirement. Because it is 100% voluntary, you can choose the amount you’d like to put into your SRS account (subject to a cap).
Benefits of having an SRS account
Tips and tricks on withdrawing funds from your SRS account
While you can technically withdraw funds from your SRS account any time, withdrawals before the statutory retirement age (62, at time of writing) will be subjected to a 5% withdrawal penalty. Also, 100% of the amount withdrawn will be subjected to tax. However, this withdrawal flexibility will come in useful if life takes an unexpected turn and you need some liquidity. But if all goes well, you’ll only be taxed on 50% of the withdrawal amount if you make a withdrawal after the retirement age. Based on Singapore’s income tax system, withdrawing $40,000 a year would be the wisest choice, as only $20,000 will be taxed. These immediate savings are provided you do not have any form of income. With a SRS account, you have ten years to make withdrawals from your first withdrawal. Any remaining amount in your account will be considered a lump sum withdrawal, and 50% of that amount will be taxed.
Make sure your funds grow
- Singapore Government Securities/Singapore Savings Bonds
- Fixed Deposits
- Foreign Currency Fixed Deposits
- Single-Premium Insurance
- Unit Trusts