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20-12-2010, 11:13 AM
(20-12-2010, 10:45 AM)Blackjack Wrote: For the unitiated in financial matters, one could also do a top up to SA to enjoy the 4% automatically assuming the same constraint of funds being locked up. In such cases then probably its better not to put into SRS, esp if the effective tax reduction adds up to less than that.
Another thing that comes to my mind which I thought may be useful for those bordering on indecision. If you look at the the income tax rate from 2003 till date, it has been reducing quite stably. If this continues one would be taxed even less upon reaching withdrawal age. Of course, this is premised upon the trend continuing. It gets even more interesting if you factor in the future value of money, where a rational person should logically choose to be taxed in the future rather than now, given an exactly same tax rate on the same amount of money.
Of course, if income tax rate spikes instead, that is the unsaid risk that will inevitably have to be taken. I'm guessing, if that happens, something extraordinary may have happened to Singapore?
Can we top up SA? There is a maximum contribution to CPF right? I think for those with maximum CPF contribution $76k, it would not be possible to top up the SA?
Anyway, CPF release is even worse than SRS. The disbursement is totally at the discretion of CPFB. At least for SRS we can decide how much to draw and when to draw, subjected to maximum of 10yrs complete withdrawal from the first penalty-free withdrawal.
Actually I am not sure how much lower can the income tax rate fall. I think compared to many countries, our income tax rate is "quite low". The gov needs funding and our ministers salary is only ever increasing. Instead of basic infrastructure projects we are now putting money into stellar projects that puts the SG brand out to the world. This is much costlier and require more funds. How to supplement the income tax cut?
And I think income tax cuts would only affect the top earners. Unless we are in the >$320k bracket, the effect is minimal if any at all. Nonetheless, I think the rates will not go lower than 15% which is the current corporate rate. 18% may be more realistic. I suspect an announcement would be made before the election to lower tax rates for the top earners.