Why SRS accounts are a good way to save

Hi,

I supposed before we start exploring SRS, a better way will be to make cpf cash top ups i guess? Not sure if this is right.

Cash top ups have benefits of tax reliefs as well as gives you an interest rate. Assumption is long term view of retirement. 

Any brothers/sisters can advise if this is so/

(23-11-2015, 02:59 PM)alex Wrote: Hi,

I supposed before we start exploring SRS, a better way will be to make cpf cash top ups i guess? Not sure if this is right.

Cash top ups have benefits of tax reliefs as well as gives you an interest rate. Assumption is long term view of retirement. 

Any brothers/sisters can advise if this is so/

You can claim tax relief for SRS up to the contribution cap of SRS which is S$12,750 for 2015 and raised to S$15,300 from 2016 onwards. This is good for the high income earners to reduce tax. As pointed out in this thread earlier, there is a revision which benefits those who bought equities using SRS monies. You no longer have to liquidate your investments when you start withdrawing from your SRS account.

For cash top-ups to CPF under the Retirement Sum Top-Up scheme:

"Top-up monies are set aside specifically for retirement needs and will be used to increase the recipient’s payout level and/or payout duration. Hence it cannot be used for other purposes such as education, investment, insurance premium payments, housing, pledging and/or exemption.
 
If you had received top-ups before age 55, the top-ups and accrued interest in your Special Account (SA) will be transferred to your Retirement Account (RA) when you turn 55. Any excess, above the Full Retirement Sum applicable to you, can be withdrawn when you apply for withdrawal at age 55."

Reference: https://www.cpf.gov.sg/members/faq/schem...sum-scheme

I chose to meet my Full Retirement Sum obligation via a lump sum contribution rather than to spread it out in tranches of S$7,000. I am also utilising the SRS tool. Painful but necessary.

Perhaps you can start with the RS top-ups first to ensure a basic retirement level is catered for first.