Supplementary Retirement Scheme (SRS): A Beginner’s Guide Part I
I have heard about Supplementary Retirement Scheme (SRS) from a forum and a colleague. A woman wrote in the forum that she has more than $250000 within 5 years of working, and she made used of the SRS to save. I was a little curious, but did not think that I earned enough to require the need for SRS to reduce my taxable income. My colleague encouraged me to use that, but my excuse was I did not belong to the higher income tax bracket.
However, I decided to take a second look at SRS. We can contribute up to S$11,475 a year (for Singapore citizens). This figure is dependent on the CFP salary ceiling. This amount could potentially bring you to the lower income tax bracket, especially if you had just exceeded by a little.
On top of that, when you withdraw the money after retirement (currently set at 62), you only have to pay tax 50% of the amount you take out. This is to be spread over ten years, so you could potentially not pay a single cent on income tax, or just very little.
Assuming you are 30 years old and if you can contribute the same amount ($11 475) for another 30 years, you should get $344250. This amount does not include interest at all. With compounding interest, it should grow even more. Based on UOB’s prevailing interest rate for SRS, it is only 0.25%. Using a financial calculator, it will be $370,285.34. This is an increase of $26,035.34. With the taxes saved, savings should be even more substantial.
Of course, with an interest rate of only 0.25%, it may not be worth contributing so much, unless you earn really a lot, and every little way to reduce income tax should be explored. How do people then make money from SRS?
You may want to check out this link on what SRS is all about.
Do you want to know how using SRS to save a few hundred dollars in income tax to make a whopping six digit $255k gain? Read Supplementary Retire Scheme (SRS): A Money Crunching Guide Part II which would be published tomorrow.
Sarah Tan – SingaporeProfit.com
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I paid few hundered dollars for income tax, looking forward your report tomorrow, to see if I could reduce income tax and save more for retirement.
Thanks for your interest.
My colleague told me she’s paying $1500, double of what she used to pay, and it made me think that for that 10-20% more in income, she has to pay 50% more in income tax. It’s not a fair deal. I thought she was earning way more than what I did, but it turned out that it was just the progressive tax structure.
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Fun. Add to your bookmarks. And how long it took to write articles?
That’s kind of… abrupt.
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[...] Alternative sources: http://mrwangsaysso.blogspot.com/2009/12/supplementary-retirement-scheme.html; http://www.salary.sg/2009/whats-not-good-about-supplementary-retirement-scheme-srs/; http://singaporeprofit.com/2007/07/14/supplementary-retirement-scheme-srs-a-beginner%E2%80%99s-guide... Like this:LikeBe the first to like this post. [...]