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How AK uses his SRS money and why?

Thursday, January 12, 2017


Do you have to work beyond retirement age?

"Who is going to pay? Take responsibility."
For anyone who pays quite a bit of income tax, I always suggest starting a SRS account. See related post #1.

Since the inception of the SRS, I contributed the maximum allowed annually. I won't be doing it anymore since I no longer have an earned income and would not have to pay income tax. See related post #2.

Since I have been maxing out my SRS account annually, I must have quite a bit of money saved up. What do I do with all the money in my SRS account?

Some of the money in my SRS account is invested in stocks like DBS, SATS and ST Engineering. Why these? 

With SRS money, I am always careful to invest only in companies which are unlikely to have a rights issue. So, these are companies with relatively strong balance sheets. See related post #3.

Although this might surprise some readers, I also placed some of my SRS money in endowment funds. I would choose single premium endowment funds with acceptable guaranteed returns. I would brush off those with very high projected returns but low guaranteed returns.

More than 10 years ago, it was easy to find endowment funds which guaranteed as much as 4% return per annum. 

I also liked NTUC Income's Growth Plan and plonked down a low end 5 figure sum 10 years ago. Looking at the surrender value today, it has been compounding at more than 3.2% per annum. Not bad for an insurance cum savings product.

SRS money is money meant to supplement our CPF savings. It is to help with retirement adequacy. Hence, the name Supplementary Retirement Scheme (SRS). 

So, I have always been less adventurous with my SRS money. Together with my CPF money, they form my safety net in retirement.

Regular readers know that I suggest Eating Bread With Ink Slowly. The "S" in "slowly" stands for sizing, position sizing.  See related post #4.

Many might not have realised this but it is probably because I have a big safety net in my investment portfolio which is made up of bond like elements (i.e. my CPF and SRS savings) that I can be more "aggressive" when I size my positions.

Swinging on the investment trapeze, if I should fall, I know I won't hit the floor. It is about having peace of mind as an investor.

As usual, I am just talking to myself. If you have picked up something useful from eavesdropping, lucky you. Finders, keepers.

Related posts:
1. SRS: A brief analysis.
2. I paid myself $12,750.
3. SRS and rights issues.
4. Eat bread with ink slowly.

5 comments:

Tanya said...

SRS really helped me a lot last year. Tax savings is like 2k plus. Can use to fund my parents overseas trip. :)

My only problem is currently it's just earning very low interest as I don't know how to invest in stocks.

AK71 said...

Hi Tanya,

You "made" more than 10% by contributing to your SRS account. If you were to leave the money in a savings account making 0.4% per year, it would take more than 20 years to make that $2K plus in tax savings. You are already a winner. ;p

Investminds said...

Ak, SRS is helping me on tax saving and provide opportunity to build up my retirement fund. I just top up $15.3k saving into SRS and waiting for buying opportunity.

AK71 said...

Hi Investminds,

I am glad. The SRS works. :)

AK71 said...

Reader:
I just opened SRS account with OCBC.
I also have a DBS Vickers account.
Supposed I linked my SRS account to my DBS VICKERS, what happens? Can I buy shares using my DBS Vickers (linked to SRS)?

AK:
Eh. The best people to answer you are your banker and broker.

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