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Evening with AK and friends 2017. Happening on 6 October 2017.

To retire by age 45, start with a plan.

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Second "e-book".

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Why join the Supplementary Retirement Scheme?

Friday, April 21, 2017

Hi AK:
 
I just like to share one of my view on SRS account.
When I first decided to contribute to SRS, it was mainly to reduce my income tax.
 
However, I realize that a lot of people between 55 to 65 years old have to work because their CPF is not enough for them to stop work before the CPF life pay out at age 65. This is assuming that CPF is their only retirement fund.
 
By contributing to SRS, we will have a sum of money which we can withdraw at age 62 penalty free. I do realize that you can withdraw up to $40k to avoid paying income tax on them.

Hence, SRS form a safety net for us between the age of 55 to 65. Knowing that we have something to withdraw for our old age at 62 instead of 65.

Maybe this might convince more people to contribute to their SRS?
Kind Regards,
HH
 


Hi HH,
I feel the same way. I will be very happy to share your POV in my blog. Thank you. :)
Best wishes,
AK


Related post:
SRS e-book and analysis.

6 comments:

Breakfive said...

I agree SRS is mainly for tax advantage but it does not make sense for married women with kids anymore because the income tax relief is capped alongside with all other relief.

AK71 said...

Good update :)

Taxpayers who make SRS contributions on or after 1 Jan 2017 should note that the overall personal income tax relief cap of $80,000 applies from YA 2018 (when the income earned in 2017 is assessed to tax).

SRS INCOME TAX RELIEF.
Feb 16, 2017

Breakfive said...

Yep.. I think this income tax relief cap really is a step backwards for working mothers because even CPF contributions (to parents / self ) also doesnt quite make sense.

AK71 said...

Hi Breakfive,

I am curious why they decided to do this as well.

New Finance Minister, new ideas.

Nick said...

It really depends on the number of children a woman has and her annual employment income. The median monthly household income in 2016 was $8,846. So generally these women pay little or no tax. Unlike Top 10% earners who now has to contribute to the government coffers.

Example Top 10% earner:
Employment Income of Mrs X $125,000
Less: Personal Reliefs
- Earned Income Relief $1,000
- CPF Relief $20,400
- NSman Wife Relief $750
- WMCR on 1st child $18,750 (15% x $125,000)
- WMCR on 2nd child $25,000 (20% x $125,000)
- WMCR on 3rd child $31,250 (25% x 125,000)
- Foreign Maid Levy Relief $1,440
- SRS Relief $15,300
Total Personal Reliefs $113,890
Total Personal Reliefs after capping (for YA 2018) $80,000
Chargeable Income $45,000 ($125,000-$80,000) vs $11,110 ($125,000-$113,890) w/o cap
Tax Payable by Mrs X $900 vs $0

AK71 said...

Hi Nick,

Ah, I see. For the purpose of wealth redistribution, it would make sense for the top earners to pay some income tax. We would have to appeal to their charitable side. ;)

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