Our guest blogger, Matthew Seah, has kindly obliged to elaborate on how funds in our SRS account could be used to provide us with lifelong income:
If we should have much more than $400K ($40K x 10 years) in our SRS accounts by the time we retire at 62, we would have to pay some income tax as we withdraw the funds from our SRS accounts over the next 10 years.
(For more details on this, see related post at the end of this guest blog.)
In fact, depending on how much we have in our SRS accounts, we might even be taxed at a much higher rate.
For example, assuming that we amassed $1 million in our SRS accounts, an annual withdrawal of $100K would mean paying $700 in income tax a year.
One way to milk more money from the SRS account is to purchase an annuity which pays us in perpetuity.
We would withdraw less money on a per year basis but we would have a guaranteed stream of income as we enjoy our retirement.
Using $1 million balance at age 62 as an example, below is what our annual income from SRS and NTUC Classic Annuity would look like:
*Annuity payout is an estimate based on the guaranteed and non-guaranteed payout. |
In this particular case, the taxable income is only $21,510 which means a tax of $30.20 per year after the SRS account has closed at age 72.
That doesn't sound so bad, does it?
Related post:
SRS: A brief analysis.