{"id":2788,"date":"2017-07-24T07:00:18","date_gmt":"2017-07-23T23:00:18","guid":{"rendered":"https:\/\/www.smallcapasia.com\/?p=2788"},"modified":"2017-07-20T23:25:21","modified_gmt":"2017-07-20T15:25:21","slug":"complete-guide-invest-using-srs-funds","status":"publish","type":"post","link":"https:\/\/www.smallcapasia.com\/zh-hans\/complete-guide-invest-using-srs-funds\/","title":{"rendered":"The Complete Guide on How to Invest Using Your SRS Funds"},"content":{"rendered":"<h3><strong>How SRS works<\/strong><\/h3>\n<p>The Supplementary Retirement Scheme (SRS) is a voluntary scheme by the Singapore government to encourage individuals to <strong>save for retirement<\/strong>.<\/p>\n<p>It is part of the Singapore government\u2019s plan to address the financial needs of a graying population and complements the Central Provident Fund (CPF).<\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-2795\" src=\"https:\/\/www.smallcapasia.com\/wp-content\/uploads\/2017\/07\/retirement-using-srs.jpg\" alt=\"retirement using srs\" width=\"446\" height=\"254\" \/><\/p>\n<p>CPF savings are meant to provide for housing and medical needs and for basic living needs after retirement. Unlike the CPF scheme, participation in SRS is <strong><em>voluntary<\/em><\/strong>.<\/p>\n<p>SRS members can contribute a varying amount to SRS (subject to a cap) at their own discretion. The contributions may be used to purchase various investment instruments.<\/p>\n<h3><strong>Advantages <\/strong><\/h3>\n<ul>\n<li>You can claim tax relief for contributions made to SRS.<br \/>\nEach dollar of SRS contribution will reduce your income chargeable to tax by a dollar.<\/li>\n<\/ul>\n<p style=\"text-align: center;\"><strong><u>A comparison of Annual income of $75,000 vs $120,000<\/u><\/strong><br \/>\n[The more you earn, the higher tax savings you earn]<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-2796 size-full\" src=\"https:\/\/www.smallcapasia.com\/wp-content\/uploads\/2017\/07\/tax-savings-srs.png\" alt=\"tax savings srs\" width=\"556\" height=\"387\" \/><\/p>\n<ul>\n<li>Investment gains will accumulate tax-free in SRS [Perfect for long-term investors]<\/li>\n<li>Contribution is voluntary. You can skip that year\u2019s contribution or reduce it if you are cash-tight.<\/li>\n<li>Tax will be payable only when you withdraw your savings from SRS.<br \/>\nIf you withdraw your savings upon retirement, only 50% of the savings withdrawn will be subject to tax.<\/li>\n<\/ul>\n<p>Here&#8217;s 1 important thing to note: You may spread your withdrawals over a period of up to 10 years to meet your financial needs. Spreading out your withdrawals will generally result in greater tax savings as the illustration below proves.<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-2797 size-full\" src=\"https:\/\/www.smallcapasia.com\/wp-content\/uploads\/2017\/07\/srs-withdrawals.png\" alt=\"srs withdrawals\" width=\"566\" height=\"263\" \/><\/p>\n<h3><strong>Disadvantages<\/strong><\/h3>\n<ul>\n<li>Most importantly, the SRS program is primarily intended to be a long-term savings scheme. Thus, penalties and taxes are imposed on <strong>premature withdrawals [5% penalty]. <\/strong><\/li>\n<li>And if the contributor withdraws the SRS before the statutory retirement age of 62 [<em>subject to changes<\/em>], he\/she will be <strong>taxed on 100% of withdrawals<\/strong> as compared to 50% after the statutory retirement age.<\/li>\n<li>Unlike the CPF, the SRS does not give a fixed 2.5% interest rate on savings. However, the purpose of SRS is to utilize the cash to <strong>invest and earn higher returns<\/strong>! What\u2019s more\u2026 it offers <strong>tax free investment gains<\/strong> as previously mentioned which can translate to a substantial amount in savings!<\/li>\n<li>SRS is <strong>more suited for people with high average monthly income<\/strong> above $5k to justify the long locked-in period for the tax savings of a few hundred dollars annually. To see how much exactly you can save, look at the next page under \u201cFAQs of SRS account\u201d.<\/li>\n<\/ul>\n<h3><strong>FAQs on using your SRS Account<\/strong><\/h3>\n<p>Firstly, you must have many other FAQs regarding how to utilize SRS.<\/p>\n<p>You can go to this website &#8211; <a href=\"http:\/\/app.mof.gov.sg\/data\/cmsresource\/srs\/SRS_Booklet%20-%2018Feb11.pdf\" target=\"_blank\" rel=\"noopener noreferrer nofollow\">http:\/\/app.mof.gov.sg\/data\/cmsresource\/srs\/SRS_Booklet%20-%2018Feb11.pdf<\/a> to clarify any doubts.<\/p>\n<p>Secondly, you can check out more details by just going down to any of the 3 local banks and opening an SRS account with them:<\/p>\n<ol>\n<li>Development Bank of Singapore (DBS) Ltd<\/li>\n<li>Overseas-Chinese Banking Corporation (OCBC) Ltd<\/li>\n<li>United Overseas Bank (UOB) Ltd<\/li>\n<\/ol>\n<p>Many people have the burning question of <strong><em>exactly how much tax savings<\/em><\/strong> they will be entitled to according to on their own annual income and personal reliefs.<\/p>\n<p>I have found a calculator from OCBC which you can check out personally &#8211; <a href=\"http:\/\/www.ocbc.com.sg\/personal-banking\/Investments\/srs-calc.html\" target=\"_blank\" rel=\"noopener noreferrer nofollow\">http:\/\/www.ocbc.com.sg\/personal-banking\/Investments\/srs-calc.html<\/a>.<\/p>\n<h3><strong>Investing with SRS Funds<\/strong><\/h3>\n<p>And here comes the most awaited question: <strong>What investment instruments can I purchase using my SRS funds?<\/strong><\/p>\n<p>You may <a href=\"https:\/\/www.smallcapasia.com\/3-top-reasons-to-start-investing-now\/\" target=\"_blank\" rel=\"noopener\">invest <\/a>in a wide range of financial assets, including those offered by financial institutions (product providers) other than your SRS operator.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-2798 size-full\" src=\"https:\/\/www.smallcapasia.com\/wp-content\/uploads\/2017\/07\/srs-investments.jpg\" alt=\"srs investments\" width=\"620\" height=\"430\" \/><\/p>\n<p>Your product providers will be able to provide information on the products that they are offering for SRS. However, direct property investments are not allowed.<\/p>\n<p>Acceptable financial instruments include:<\/p>\n<ul>\n<li>Unit trusts<\/li>\n<li>Insurance products<\/li>\n<li><a href=\"https:\/\/www.smallcapasia.com\/3-big-reasons-to-invest-in-small-cap-stocks\/\" target=\"_blank\" rel=\"noopener\">Stocks<\/a><\/li>\n<li>Bonds<\/li>\n<li>Fixed Deposits<\/li>\n<\/ul>\n<p>As for life insurance products, the following conditions shall apply:<\/p>\n<ul>\n<li>Only single premium products are allowed (including recurrent single premium products, encompassing both annuity and non-annuity plans).<\/li>\n<li>Life cover (including total and permanent disability benefits) will be capped at 3 times the single premium.<\/li>\n<li>Plans can allow for a contribution continuation feature\/benefit upon disability.<\/li>\n<li>Other types of life insurance e.g. critical illness, health and long-term care are excluded.<\/li>\n<li>Trust nomination is not allowed for life insurance products purchased using SRS funds.<\/li>\n<\/ul>\n<h3>Conclusion<\/h3>\n<p><span style=\"color: #ff0000;\"><strong>Returns: <\/strong><\/span><strong>Tax Savings <\/strong>of a few hundred dollars to a few thousand dollars<\/p>\n<p><strong><span style=\"color: #ff0000;\">Risks:<\/span> <\/strong><strong>Penalties<\/strong> on pre-mature withdrawal before retirement age<\/p>\n<p><span style=\"color: #ff0000;\"><strong>Maximum Contribution (revised on year 2011):<br \/>\n<\/strong><\/span><strong>$12,750<\/strong> (up from $11,475) for Singaporeans and Permanent Residents;<br \/>\n<strong>$29,750<\/strong> (up from $26,775) for foreigners<\/p>\n<p><span style=\"color: #ff0000;\"><strong><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-2799\" src=\"https:\/\/www.smallcapasia.com\/wp-content\/uploads\/2017\/07\/maximum-of-srs-1024x283.png\" alt=\"maximum of srs\" width=\"605\" height=\"167\" \/><\/strong><\/span><span style=\"color: #ff0000;\"><strong>Who:<\/strong><\/span><\/p>\n<p><strong>Singaporeans and PRs<\/strong> earning at least <strong>more than $4k monthly<\/strong>.<br \/>\nThe tax savings has to be adequate to compensate for the long lock-in period until retirement age!<\/p>\n<p><strong>Foreigners<\/strong> who foresee that they will be <strong>staying over 10 years<\/strong>.<br \/>\nThey can utilize it as tax reliefs to lower a substantial portion of the taxes.<\/p>\n<p><span style=\"color: #ff0000;\"><strong>Recap:<\/strong><\/span><\/p>\n<p>SRS is a scheme initiated by the Singapore government to help people plan for their retirement as\u00a0many people fail to start planning until too late.<\/p>\n<p>On top of the tax savings you can receive, you can also invest in long term financial instruments like stocks and insurance to increase your returns.<\/p>\n<p>As the slogan says, this is like killing 2 birds with a stone! If you ask me, the <em><u>steps to fully utilize SRS is by taking the steps below<\/u><\/em>:<\/p>\n<ul>\n<li><strong>Contribute<\/strong> the <strong>maximum amount<\/strong> yearly,<\/li>\n<li>Use the funds to <strong>invest in undervalued companies<\/strong> (e.g. blue chips) over the long term. (find out how investing is like <a href=\"https:\/\/www.smallcapasia.com\/investing-is-like-growing-bamboo-tree\/\" target=\"_blank\" rel=\"noopener\">growing bamboo trees<\/a>!)<\/li>\n<li>Lastly, <strong>spread the withdrawals over 10 years<\/strong> to save on taxes payable during withdrawals.<\/li>\n<\/ul>\n<p>Happy Investing!~<\/p>\n<table border=\"0\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody>\n<tr>\n<td valign=\"top\" width=\"1092\"><b><i>SmallCapAsia.com<\/i><\/b><i>\u00a0is a website focused primarily on undervalued gems that can generate Big, Fat Returns for investors.\u00a0Our Slogan is simple: Start Small, Win Big!\u00a0<\/i><b>Subscribe to our <a href=\"http:\/\/eepurl.com\/cDE1Sf\" target=\"_blank\" rel=\"noopener noreferrer nofollow\">FREE e-newsletter<\/a><\/b><i>\u00a0to get a regular dose of investment wisdom not found anywhere!<\/i><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>How SRS works The Supplementary Retirement Scheme (SRS) is a voluntary scheme by the Singapore government to encourage individuals to save for retirement. It is part of the Singapore government\u2019s plan to address the financial needs of a graying population and complements the Central Provident Fund (CPF). CPF savings are meant to provide for housing [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":2794,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[254,255],"class_list":["post-2788","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-srs","tag-supplementary-retirement-scheme"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts\/2788","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/comments?post=2788"}],"version-history":[{"count":0,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/posts\/2788\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/media\/2794"}],"wp:attachment":[{"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/media?parent=2788"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/categories?post=2788"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.smallcapasia.com\/zh-hans\/wp-json\/wp\/v2\/tags?post=2788"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}