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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.


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...

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)?

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

AK71 said...

Hi AK, would appreciate if you talk to yourself again. I'm thinking of contributing to my SRS this year and was wondering do you use it for your warchest? If i'm not wrong you use it to buy safe/long term approach which i am also looking to do. Thanks.

MH said...

Hi AK,
Thank you so much for giving back to the community by sharing your experiences.
Im 42 this years, and being to take control of my retirement planning. I took your advice by contributing to my CPF SA account. As for SRS, beside the ntuc growth, which other investment do you advice? TIA

AK71 said...

Hi Chris,

I am glad you are taking full advantage of your CPF membership.

NTUC Income growth plan is the only one left in my SRS account now.

I am investing the rest of my SRS money in the stock market for income.

foolish chameleon said...

Ak, can you talk to yourself.
a family member has a sum < 100k in SRS.
but becoz we didnt realise the max drawdown age is 72. (he is 70 next year)
and also there is passive income. so , it is not possible to withdraw in cash, or it will be tax.
the only way is pte annuity. which is not a bad thing, since it complements the cpf life.
however, choosing srs approved annuity is quite hard.
if it was you to choose for your mum or yourself, which would you go for? and why?

AK71 said...

Hi fc,

From what I know, you can start withdrawing from the SRS at age 62 but you don't have to.

Once you start withdrawing from your SRS, you have 10 years to withdraw everything.

So, for example, your relative can withdraw the money at age 80, if he wants, but must take everything out by age 90.

foolish chameleon said...

oh , i see.. i thought 62 (as statement in the srs form)

but in any case, i am also keen to know about pte srs annuities.
the second part of my post above.
"however, choosing srs approved annuity is quite hard.
if it was you to choose for your mum or yourself, which would you go for? and why?"
can youtalk to yourself on that?

assuming RA is at ERS, BHS is max.

AK71 said...

Hi fc,

My mom says she just wants to leave her SRS money for us children.

When mothers have made up their minds, best to let them be. ;p

As for me, I will cross the bridge when I come to it. ;)

Yv said...

Hi AK, I have only been using SRS monies for single premium NTUC growth or SAIL plans and never in shares. Have read in various posts that you also use it for stocks that are unlikely to have rights issues and with strong balance sheet.

Can you advise if I have to liquidate such investments in shares within the 10Y withdrawal period once I start my withdrawal?

AK71 said...

Hi Yv,

From what I know, in such an instance, we wouldn't have to liquidate stocks held in our SRS account if we don't wish to but, of course, things could change.

As you are risk averse, I believe that what you are currently doing is probably best for peace of mind. :)

Yv said...

Thanks AK, yeah i sleep well at night.

By the way, are you still watching K-drama? Stock Struck (2022) worth a watch.
Five people who invested in the stock market take part in a mysterious stock meeting. There, they learn about life, love, and friendships through investing in stocks.

AK71 said...

Hi Yv,

When it comes to watching drama, I like period, time travel, fantasy and generally anything that has almost zero reference to present day reality.

I just watched Lang Ya Bang (S1) recommended by a friend, for example.

I am not sure I would enjoy Stock Struck but thanks for recommending. :)

My hobbies are for escapism. LOL. ;p

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