SRS portfolio in 2024. What did I do?

SRS was a topic I used to blog about pretty often.

I have not been blogging about it as much since I have not been making contributions in recent years.

Reason is because I no longer pay income tax.

See:
Income Tax payable?

If we are still paying income tax, contributing to our SRS account makes sense to enjoy some tax relief.

Of course, we want to put our SRS money to work or we would get a very miserable interest rate.

For many years, I used the SRS money to buy plain vanilla endowment policies.

They were savings plan with some insurance thrown in.

In fact, I still have one or two of those with NTUC Income using SRS money.

In recent months, I also used the money to buy T-bills with yields being so much higher than a couple of years ago.

Dividends paid by my investments in stocks using SRS money are used for this purpose.

Yes, I also use SRS money to buy stocks of businesses which I think make good investments for income.

I have blogged about this before and shared what kind of stocks I would buy with SRS money.

Basically, the businesses must be good income generators with strong balance sheets; nothing which is likely to do rights issues.

The very practical reason is because we must have the excess funds in our SRS account to take part in rights issues.

This can be difficult to ensure.

I shared my SRS portfolio of stocks before but that is outdated by now.

See:
Win and win again with SRS.

I had SATS in the portfolio.

Of course, regular readers would know that I sold it shortly after it announced the decision to buy WFS.

SATS just didn't have sufficient resources to do what they suggested.

They had to raise funds from shareholders.

It was something unexpected.

So, I took the opportunity to sell when there was a bounce in the stock price.

In place of SATS, there are ComfortDelgro and OCBC in my SRS investment portfolio now.

This is what the portfolio looks like now:

Based on the purchase prices, it is not difficult to guess that DBS and ST Engineering have been in the portfolio for some time now.

So, like what I did?

Paid less income tax and put the money to work to generate more tax free passive income?

We can certainly win and win again with SRS.

If AK can do it, so can you!

Reference:
How AK used his SRS money?

Stronger personal balance sheet and cash flow statement.

Reader says...
I need to spend more time to learn more about investment and not wait till it's too late.

I find it inspirational to read your blog and it motivates me to invest more to be like you.





I have some savings every month and would like to seek your advice on how I can manage it to optimize the very little amount and still be able to grow it further.

1) Reduce my housing loan with the bank in Jan 2020

2) Transfer money to SRS to reduce my income tax contribution for 2018

3) Put aside for my savings account

4) Put aside money for trading





Should I divide my savings evenly among the 4? And since the money in SRS cannot be withdrawn, do you think I should use it to trade?

AK says...
Welcome to my blog. :)

I am glad that you have realised the importance of investing for income.

I believe that you will thank yourself in your golden years. :)





For sure, unless we are born with a spoon made of some precious metal in our mouths, we need to save money in order to have money to invest with.

OK, I know we can also borrow money to invest with but not everyone can sleep well investing with borrowed money.

Indeed, I have a blog on how to have peace of mind as an investor and you might want to read the related posts at the end of this blog.





You have to know that I am not a financial adviser and I am not allowed to give specific advice to anyone.

As a blogger, however, it should be safe enough for me to talk about things in general and you have to make your own decisions.





1. If interest rates go much higher and is even higher than the 2.5% we earn on our savings in the CPF-OA, it makes sense for us to pay down our home loan, especially, if we don't know how to safely invest our savings for much higher returns.

2. Use the SRS to reduce income tax payable only if you have maxed out your CPF-SA. With the CPF-SA, you earn 4% to 5% per annum. 

If you decide to do this, remember, only the first $7K of top up (per year) to the SA will enjoy income tax relief. 







If you have more to contribute, let it flow into your SRS and you could use the SRS savings to invest for income (but dividends cannot be withdrawn until age 62 together with the SRS savings).

See: SRS: e-book and analysis.

3. We always need an emergency fund and a war chest. Having more money saved up is a good idea.

4. Of course, you should think about investing for income.





Which one you do and in what proportion depends on what is more important to you.

If you feel that some measure of financial security is more important while retaining flexibility, then, you should concentrate on #3 first, for example.





It doesn't take much to have a stronger personal balance sheet and cash flow statement.

It does, however, require a lot of discipline.

Related posts:
1. Peace of mind as investors.
2. Top Up SA, MA or SRS?
3. How much in Emergency Fund?

Options with CPF Life and SRS in retirement.

Reader:
Just wondering if you have given any thoughts on when you will start your CPF LIFE payout? Do you mind blogging about it?

I have been building up my SRS savings. By the time I hit the Official Retirement age of 62 (for now), if I start withdrawing my SRS at 62 to 72, the annual sum will be equivalent to CPF LIFE.




Now the question is, should I start my CPF LIFE payout at 65 or delay till 70 to gain more interest and thus a slightly higher monthly payout?

According to the picture you posted on 17th July 2017, at FRS: age 65 = $1,380 mthly. At age 70 = $1,840.

What will you do? A bird in hand is better than a slightly bigger bird in the bush?



AK:
With CPF Life, it depends on whether I need the money. At 65, if I need the money, then, I will start drawing from the annuity. 

If I don't need the money, I will leave it to grow, earning a risk free and, hopefully, meaningful interest rate by then.

With SRS money, once I start the withdrawal process, I would have to empty the account within 10 years unless I use the money to buy an annuity. I have some investments in my SRS account and I would probably have to liquidate these. 

So, I would probably consider withdrawing money from my SRS account in a bull market sometime after I turn 62.

So, depending on the situation when the time comes, I could tap either the SRS or CPF Life first or not at all.
---------



Liu Jiayi says:
From Jul 2015, SRS members will be able to apply to their SRS operators to withdraw an SRS investment by transferring the investment out of their SRS accounts (e.g. into their personal Central Depository (CDP) account), without having to liquidate their SRS investments.

(Please see comments section below for the full comment.)

Related posts:
1. CPF Life Payout Estimator.
2. CPF Mobile Service Centre.
3. Lifelong income with SRS.

What should I do with my bonus?

Reader:
I received a bonus and I was wondering which of these should I do:

1) voluntary top up my CPF SA

2) contribute to SRS

3) help my parents to buy hospitalization insurance

4) keep it as warchest

I would be required to pay income taxes for this year of assessment. I would like to ask for your opinion.


AK:
You have to decide what is more important for you. No one can do this for you. 😉

For me, having insurance is important. Bad things happen and could wipe us out.

Having said this, your parents should be covered under Medishield Life. Check to be sure. If they are OK with staying in class C or B2 wards, there is no need to buy private shield plans.

You might be interested in this:
http://singaporeanstocksinvestor.blogspot.sg/2015/03/should-i-top-up-my-cpf-sa-cpf-ma-or-srs.html

Related post:
Enough H&S coverage for parents?

Why join the Supplementary Retirement Scheme?

Reader says...

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 (per year) 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 (which the earliest  CPF Life can start paying).

Maybe this might convince more people to contribute to their SRS?

AK says...
I feel the same way. I will be very happy to share your POV in my blog. Thank you. :)

Related post:
SRS e-book and analysis.

Win and win again with SRS.

I blog about the SRS pretty often and how my SRS account is a war chest. 

I also said before that I don't mind having quite a bit of money idling and waiting for opportunities. 

When opportunities come knocking, I pounce!

 Chatting with a reader in FB.

I get to save on income tax and invest for higher returns. 

It is a win win situation with both winners being me! 

Greedy AK! 

Bad AK!




SRS money cannot be withdrawn until age 62 unless we are OK with incurring a penalty. 

So, it would be good to use the money to buy into businesses which we believe will still be around when we are 62. 

This might sound amusing but it is the truth.

Of course, the businesses should pay meaningful dividends and offer sustainable yields that at least mimic CPF interest rates.

In a nutshell, invest with our SRS money when the time is right. Don't speculate with it. 




SRS money is meant to be our second retirement nest egg, after the CPF. 

Don't play play.

Being unemployed, I will not be contributing to my SRS account anymore. 

So, any growth in my SRS account will be purely organic henceforth.





Why win once when we can win twice with the SRS? 

Win and win again with SRS?

I like.

Related posts:
1. SRS, CPF and rights issues.
2. SRS: e-book and analysis.
3. How AK uses his SRS money and why?

How AK uses his SRS money and why?

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.

Regret parting with CPF-OA savings 9 years ago.

Hi AK,

I've been reading your blog recently and have been very inspired by the way you invest.

I need to seek your advice for the Prudential units trust and SRS account

I used my CPF-OA account to invest in the Prudential unit trusts 9 years ago when my insurance agent said that they will earn me more interest than the 2.5% interest CPF gave me.

Fast forward 9 years now, my $80k original invest is only worth $71k now.

I really regret listening to the insurance agent.

My question is should I cut my losses now and put the $71k put into my CPF OA account or SA Account? At least I can earn some interest rate on my $71k before I retire.

My only comfort is that shld anything happen to me now, my family can get $100k from the unit trust as it has some insurance coverage.

As per your blog, I've also set up my SRS account.

Can you advise which fund I should buy with the money in the SRS account. It's sitting there doing nothing and the interest rate in DBS is very low.

Many thanks and I look forward to hearing from you soon.

J

 

Hi J,

1. Buy insurance for the sake of insurance. Don't mix insurance and investment.

You might want to read this:
http://singaporeanstocksinvestor.blogspot.sg/2016/06/how-many-20-years-and-29000-do-we-have.html

2. No one cares more about our money than we do. Always read the fine print.

You might want to read this:
http://singaporeanstocksinvestor.blogspot.sg/2016/09/posb-manuregular-payout-better-than-cpf.html

3. I won't tell you what to use the SRS money for but I will say to avoid investing in anything which might have rights issues.

You might want to read this:
http://singaporeanstocksinvestor.blogspot.sg/2015/07/srs-account-cpf-account-and-rights.html

Best wishes,
AK

52 year old lost $200K and unsure about next 30 years: Discussion continues.

Reader says...
Hi AK,

Thank you so much for responding to my email and providing your thoughts. I have been thinking over it for the past few days.

1.

I am pretty frugal and current monthly personal expenses on myself is about $1k. Another $1k spending on the maid, and $500/mth on insurance.

So roughly $2.5k/month.

2.

The sad thing is I haven't been able to build up any passive income at all, except for the $1.4k monthly rental from the 2 rooms let out.

3.

Friends ask me to move to the condo and rent out the 5-room flat for passive income, but the rental market seem weak with all the property cooling measures and tons of new hdb flats launched.




4.

I do not have any dependents, just myself to take care of.  Would it be a good idea to take up a loan (6% p.a.) from the whole life and continue to let it run vs surrendering the policy?

5.

I popped by the bank and opened a SRS account today and will transfer in the annual max $15,300.  I am at the 14% income tax bracket, so hopefully it will help to bring it down a bit (maybe a few hundreds).

Hope to go into ETFs and REITS for passive income, in your view is it ok to enter at current level or i should wait for market to go down a bit?  I am very worried because i cannot afford to lose too much at my age, and am really clueless which ones to go for..

AK says...

1. Frugality can only help in your wealth building effort. Good on you.

2. Try to build up passive income to improve cash flow but it is easier to improve cash flow by reducing expenses first. You still have room for this.





3. Rental market is expected to remain soft. My stand on the condo remains the same if you are concerned about cash flow. (Readers who are interested, please see related posts below.)

4. If you have no dependents, you don't need life insurance. (Dispense with this expense and have more savings.)





5.1 SRS makes sense for anyone who is paying quite a bit in income tax.

5.2 If you are worried about losing money at your age, obviously you are worried about volatility. If you cannot stomach volatility, staying away from the stock market is not a bad idea. Peace of mind is priceless.







Related posts:
1. 52 year old lost $200K and unsure about next 30 years (Part 1).
2. Should we buy a shoebox condo in NE Singapore?

Just be a better saver and forget investing for some.

• 
  
  

  Reader: I am currently 28 years old earning annual income of around 240K. Not sure whether doing SA contribution of 7K per annum and SRS 15.3K per annum is a wise move for my current age? Main purpose is to get income tax relief as much as possible since I am in high bracket tax payer and this contribution might be able to save quite a lot on income tax
• 

  
  

  Assi AK: As long as you are paying a lot in income tax, it makes sense to do MS Top Up to SA and to contribute to SRS. You don't really need to invest. Just be a good saver.
  

• 
  
  

  Reader: But it is a long long way to go before i can see the money again for CPF at 55 yo and SRS at 62 yo. what if i die before that? Lol
• 

  
  

  Assi AK: The money goes to your loved ones. ;)
• 
  
  

  
  
  

  Reader: i dont get to enjoy the hard earned money then
• 

  
  

  Assi AK: You cannot have your cake and eat it too. You have to question what is more important to you.
• Reader: I plan to have financial freedom like u by investing for income
• 

  
  

  Assi AK:  Everyone is different. Dun be like me. ;p
• 
  
• 
  
  
• Reader:  I can save around 150K a year after deducting all the expenses including income tax. Slowly buying solid dividend stocks to hopefully get sizeable passive income like u
  
• 

  
  

  Assi AK: Sounds like a good plan.
  

• 
  
  

  Reader: I seriously think your strategy is good that's why i follow
• 

  
  

  Assi AK: If this is more important to you than getting income tax relief, well, you have your answer. :)
• Reader: I am super conservative and not risk taker as well
  
• 

  
  

  Assi AK: If you are investing, you are taking risk.
• Reader: Haha true
  
• 

  
  

  Assi AK: The only risk free way to building wealth is the CPF. ;)
• Reader: CPF top up is risk free but not sure worth the wait and lock up of cash
  
• 

  
  

  Assi AK: Well, you know my answer to that. You have to decide for yourself if you believe me. ;p

Related posts:
1. Want to create another stream of income?
2. Should a young person contribute to CPF or SRS account?
3. Should I top up CPF-SA, CPF-MA or SRS account?