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Time for AK71 to be paid $12,750.

Monday, December 2, 2013

Who? Who?

Who is paying AK71 so much money?

Why? Why?

Make a guess?

Pause.

Pause.

Pause.

Give up?

It is the last quarter of 2013 and I am making my yearly contribution to my SRS account. So, I am paying myself $12,750.

Aiyoh, who threw something rotten at me? Hey, must have a sense of humour mah. LOL.

Although the contribution cap is S$ 12,750, we do not have to contribute the maximum if we don't need to or are unable to.

Don't need to? Well, a person who pays relatively little income tax could be tax free simply by contributing a few thousand dollars to his SRS account.

Unable to? Everyone's circumstances are different. $12,750 is quite a bit of money for many. If a person could only contribute $5,000 comfortably, then do so. Although he would not enjoy the maximum tax savings, he would still enjoy some savings.

I hope you will remember to contribute to yours before the end of the year.


The SRS is part of the Singapore government’s multi-pronged strategy to address the financial needs of a greying population by helping Singaporeans to save more for their old age. It began in 2001 and is operated by the private sector.

Writing out a cheque to myself.

Download the SRS Handbook: here.

Related posts:
1. Be rewarded for opening an SRS account.
2. A war chest called "SRS".

31 comments:

Matthew Seah said...

Hi AK,

I see the $12,750 and I know its SRS already. Can't bluff me =)

AK71 said...

Hi Matthew,

Aiyoh, you are too smart for me to play a trick on you. ;p

Money Honey said...

why are you choosing december month to do the contribution and not beginning of the year (in January month)? l prefer doing so beginning of the year so as lock-in the amount into SRS rather than risking spending it away.

agreeing with you that one need not contribute the max amount if cannot afford.

one can also do SRS contribution on monthly basis at different amount of "spare" cash; for example, $1063 x 12 months = $12750.

already too late using this installment method in Dec'13? then start using the painless installment method in Jan'14.

AK71 said...

Hi Money Honey,

I always make my contributions towards the end of the year because the SRS account attracts a pitiful interest rate. My regular savings account has a higher rate.

Yes, I suppose there is always a risk of spending away money although that risk is pretty remote in my case. I am terrible when it comes to discretionary spending, I guess, in a good way. ;p

Your idea of making a monthly contribution is a very good one for people who might find it too painful to make a one time contribution. Too late for this year, perhaps, but some readers might pick it up for next year. :)

hjteo said...

Hi AK,
Some banks now allow contribution to SRS online i.e. DBS now has online contribution if done before 18 Dec. Otherwise it will still be via cheque or at the counter.
(The info is at the DBS SRS website.)

AK71 said...

Hi hjteo,

Yup. So convenient. However, it must be a transfer from a DBS bank account, right?

Matthew Seah said...

choosing to contribute in December allows one to better gauge the amount of tax deductible required to reduce the taxable income to a lower bracket or zero.

E.g. After all allowable tax deduction, taxable income is 25k, you can then choose to contribute 5k to SRS to reduce income tax for the year to $0.

If you contribute at the beginning of the year, you may not know the exact amount to contribute to reduce the tax to $0.

Of course, this will not apply if your taxable income after deductions is beyond $32,750

hjteo said...

Hi AK,
Yes. If having a DBS SRS account, it's from a existing personal DBS savings/current account (joint account cannot). This via a online contribution form. No more going to deposit cheque into DBS/POSB branches.

link here: https://www.dbs.com.sg/personal/contact/deposit/srs-contribution/index.html?pid=pweb_dbs_deposit_srs_contribution_secureform

Read that for OCBC is via the online banking system. Can't comment on OCBC as I am using DBS.

Dividend Warrior said...

Hi AK,

Off-topic a bit. Hope u dun mind.

What do u think of AIMS. AMP's latest acquisition?

Thanks.

AK71 said...

Hi Matthew,

Thank you for rationalising this for us.

Although I am sure each one of us have our own reasons for contributing when we do, you have provided me with a new angle on why an end of year contribution is better. :)

AK71 said...

Hi hjteo,

I always write a UOB cheque to deposit into my SRS account with DBS.

Anyway, it is quite easy. I just do a quick cheque deposit. No queue. No hassle. :)

AK71 said...

Hi DW,

The Australian office building with Singtel-Optus as the main tenant? Well, it seems that AIMS AMP Capital Industrial REIT got a fair deal. There wasn't any discount to NAV.

The purchase will be fully funded by debt. So, it will be DPU accretive which is good news for unit holders. The built in 3% annual rental escalation is attractive too.

I don't understand Australian commercial property well enough to comment on whether it is a good time to move in. However, I remember George Wang saying that warehouse properties are looking attractive there.

I will have to wait for a quarter or two to see more clearly.

Zaanan said...

Thought it was your dividend from Marco Polo. :P

Cheers,
Moonlight

ryan said...

AK, if we use money in our SRS account to invest in the stock market, and we make capital gains & dividends (both non-taxable), do we end up paying tax on 50% of those gains when we withdraw it at retirement age?

AK71 said...

Hi Moonlight,

Dividends from Marco Polo Marine. Haha.. No, no. This would be too little. ;p

AK71 said...

Hi ryan,

Basically, whatever we have in the SRS account is taxable if the amount withdrawn each year exceeds the non-taxable amount. It doesn't matter how the money found its way into our SRS account. :)

So, plan not to over-contribute. About $300K - $400K seems like a good amount to have in the SRS account at retirement. Its role is supplementary, after all.

Of course, if I retire and become unemployed in the next few years, then, I will not be contributing anymore. ;p

Mad Stranger said...

Hi AK,
I fear for 2 things:
1) rise in income tax rates in the future
2) rise in withdrawal age

and if you are still working at the point of withdrawal and have since moved to a much higher tax band, wouldn't you end up paying more taxes even though only 50% is taxable?

AK71 said...

Hi Mad Stranger,

The non-taxable bracket's ceiling has been raised. So, I believe that people will have to make more money before they are taxed. This is the impression I get.

Also, even if the withdrawal age is raised, it will not affect people who started an SRS account earlier on. This was the assurance we were given.

I will not make any withdrawal from my SRS account if I should still be working at that point in time. This is a retirement account. If I am not retired, I shouldn't draw from it. :)

Mad Stranger said...

Hi AK,
The tax rates was adjusted in 2011 but the 20k non-taxable band was unchanged. But I do believe this band can become 30k or even 40k in the future, but that will be many years down the road.

You mentioned that any increase in withdrawal age will not impact existing SRS account holders. I couldn't find any mention of this on the SRS bank pages by banks or IRAS. Can you provide the source for this? Thanks

AK71 said...

Hi Mad Stranger,

I remember reading in the news but I cannot remember the source.

However, we can infer that this is the case from reading this:

"You can withdraw your SRS monies over 10 years from the date of your first penalty-free withdrawal. Withdrawals are penalty-free only if they take place after the statutory retirement age that was prevailing at the time of your first SRS contribution. The statutory retirement age for all SRS members is currently at 62."

Source:
https://www.iras.gov.sg/irasHome/page04.aspx?id=1170

Dividend Warrior said...

Hi AK,

Thanks for your insight on AIMS AMP. :)

I agree. We need to wait for a few quarters to see the impact.

AK71 said...

Hi DW,

The team at AIMS AMP Capital Industrial REIT has done well so far. I hope they continue to deliver. :)

Mad Stranger said...

Hi AK,
Thanks for your reply. With that, we need to do the first top up asap since the withdrawal age is dependent on the retirement age at that time.

Better do my first top up soon to lock in the age of 62 withdrawal age!

AK71 said...

Hi Mad Stranger,

You are welcome. :)

This is just the beginning of December. Plenty of time before the year ends.

NicK Guthe said...

Hi AK,

Do you have idea how I can see how much is in my SRS account? Would it be via the online banking system?

AK71 said...

Hi Nick,

Not all banks allow us to check our SRS account online. Mine is with DBS and I can't do it. Have to wait for the monthly statement. :(

I know OCBC allows it. Good! :)

Chris Ong said...

Hi AK,
I am wondering which is a better place to put away my money into SRS or CPF top up into my SA? Both give you tax incentives, right?
As I do not have as much money to put away in both accounts? As SA will pay an interest of 4%, it seems more attractive to me
Please advice.

AK71 said...

Hi Chris,

I don't provide advice. I just talk to myself here. ;p

Anyway, if I were doing this for myself, my first choice would be the CPF-SA. I am a lazy guy and if my savings is able to generate 4% per annum returns for me, I am happy enough.

For people who are savvy investing in stocks, then, the SRS could be preferred since the CPF-SA does not allow the money to be used for stocks investing.

Remember that no early withdrawal is allowed for the CPF-SA whereas that option is available for the SRS (but with a penalty). The option of early withdrawal might be important for some.

So, what you do depends on what you are after. Of course, both options will provide tax savings. :)

Chris Ong said...

thanks AK.

hjteo said...

Hi AK,
Just checking my DBS account and found that we can now check our DBS SRS account online - as long as we have the 2FA dongle or via sms. =)

AK71 said...

Hi hjteo,

This is good news! Thanks for sharing this with me. :)

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