There are some year-end traditions I observe more reliably than others. Contributing to SRS is one of them, although I haven’t got around to this year’s contribution yet.
I usually put in the maximum, and I intend to do the same this year, even though I’m planning to retire within the next two years. The tax saving at my current bracket is meaningful, and I don’t expect to need this money to fund the first few years after leaving work.
For citizens and PRs, the annual limit is S$15,300, subject to the overall S$80,000 personal tax relief cap. That’s the relevant small print for the contribution. IRAS has the details.
The more interesting question for me this year is what happens after the money goes in.
My money has a longer notice period
I made my first SRS contribution well before July 2022, so my penalty-free withdrawal age is 62. It’s that first deposit, even just S$1, that locks in the age, rather than opening the account.
I had briefly confused this with CPF and thought it was 55. Apparently, my money will be observing a longer notice period than I am.
Under the current rules, half of qualifying retirement withdrawals is taxable, and they can generally be spread over ten years. So I also need to consider the eventual tax bill, although I expect my taxable income to be lower by then. IRAS withdrawal rules
The restriction bothers me less now than it did when I was younger. Each year’s contribution has fewer years left to wait, and I expect my portfolio outside SRS to support my early retirement.
I don’t currently expect to need the money at 62, but it gives me options. SRS could bridge the years until CPF LIFE starts, particularly if I decide to defer those payouts to 70 for a higher monthly amount. That’s a decision for later, but having another source of funds would give me more room to make it. CPF LIFE payout options
SRS is getting a new job description
Previously, I’ve used SRS to buy income-focused funds and even a five-year endowment policy. That fitted my preference for investments that pay something back along the way, but those payouts stay inside SRS anyway. With much of my wider portfolio already generating income, perhaps I’ve been giving every account the same job description.
I’m now considering putting future contributions into a broadly diversified global equity fund. One example is the Amundi Index MSCI World Fund through Endowus, which accepts SRS money and reinvests dividends. It covers developed markets, so “World” is taking a few liberties with geography. The listed fund fee is 0.10% a year, with the Endowus access fee charged separately.
The longer horizon makes me more comfortable considering equities because I expect to fund near-term spending from elsewhere. If I decide to use SRS as a bridge to CPF LIFE, I’ll move the portion I expect to spend into less volatile investments as the time approaches, rather than risk having to sell during a downturn.
For now, the tax saving makes contributing worthwhile, while the income from my other investments gives SRS room to focus on growth. Same annual contribution, revised job scope. I guess even retirement portfolios need upskilling.