Why SRS accounts are a good way to save

[bran]

congratulations on the good news!
agreed that the benefits get better as you move up the tax brackets..based on the breakeven rate of 2x your marginal rate right?
i would still view SRS as a good destination to handle all your local SGX-based investments...with some compounded tax savings in the end.

another way to use the SRS could be to use it in conjunction with a term insurance.
say, you spent $1000 per annum on a term insurance plan to cover a larger amount.
You can then contribute another amount which you are comfortable with into the SRS into some ETF or mutual fund to compound over a long time horizon.
Once the two are put together, you almost have a "life policy" but with you in control of your investment as well as being able to claim the tax benefits for that contribution to SRS.
This plan would be perfect if SGX had a better range of ETFs available....

Yes, that is indeed my perpetual grouse =)

[naro]

I have a question regarding SRS.

If I open an SRS now and buy stocks or ETF. When I reach the age when I can withdraw SRS without penalty, do i have to sell the stock or ETF to "withdraw" my SRS? Or can I "withdraw" it by transfer it to my CDP account?

Hope someone can offer some insights.

Cheers,
Naro

[egghead]

Under current rule - NO. However, I understand that they are now looking at allowing the withdrawer as you described.

[naro]

Under current rule - NO. However, I understand that they are now looking at allowing the withdrawer as you described.

Thanks for prompt reply. So, now, based on current rules, one must sell the shares in SRS account before he or she can withdraw the money?

[egghead]

That is correct

[touzi]

I don't see the difference between stocks in SRS and CDP, apart from administrative like going thru' the bank to attend AGM. You still need to sell your CDP stocks if you need the cash.

[naro]

I don't see the difference between stocks in SRS and CDP, apart from administrative like going thru' the bank to attend AGM. You still need to sell your CDP stocks if you need the cash.

Before the retirement age, I also see no difference between buying stocks in SRS and CDP.

However, when one can withdraw the SRS money without penalty, I see a difference.

Say Mr M bought 10,000 shares of Coy A at average price of $1 before age 62 using SRS. At age 62, the price of Coy A had risen to $2 and the Coy A shares is now worth $20,000.

Because Coy A gives good dividends, Mr M wants to continue to hold Coy A. Based on the current understanding, My M must now sell all his shares held in SRS and buy at current market rate of $2 via CDP and incur transaction fees.

I personally feel that Mr M should be able to "withdraw" buy transferring it from SRS to CDP.

[Jacmar]

The reason that you got to sell your shares under SRS has got to do with taxes. After 62 if you still have taxable income the amount of money taken out of SRS will be lump into it and tax accordingly. However if you don't have anymore taxable income and withdrawal amt is below the taxable bracket then it will be tax free. Now if you want to transfer your shares from SRS to CDP, how is the tax man going to assess what's the worth of those shares. This is especially very complicating if your shares happen to be illiquid. So make things simple, you sell your shares in the open mkt and decide what you want to take out.

[valuebuddies]

SRS is designed for above the average citizens, but as what bran suggested, I have opened a SRS account with a mere S$10 savings to "lock-in the retirement age". Not sure if this works but no harm trying with just S$10.

[pantoo]

SRS is designed for above the average citizens, but as what bran suggested, I have opened a SRS account with a mere S$10 savings to "lock-in the retirement age". Not sure if this works but no harm trying with just S$10.

I was thinking about this too!

Since it's stated that "withdrawal has to be made after the statutory retirement age at the time of your first SRS contribution" (currently the retirement age is 62), does it matter how much contribution we make for our first contribution? Can anyone verify? I would like to "lock-in" the retirement age too, but I don't intend to contribute too much at this stage of my life.

Thanks in advance.