Why SRS accounts are a good way to save

[Jacmar]

The idea is for you to withdraw over 10 years. Say you accumulated $200,000 portfolio in SRS when you are 62 (assuming that is your penalty free withdrawer age), you can plan to withdraw $20,000 a year. If this is your only income at that point in your life, then the amount you withdraw is tax free as you will be below the tax bracket.

The way I understand it is different. You can withdraw up to $40k tax free. this is because only 50% of what you intend to withdraw is subject to tax. So 50% of $40k is $20k. If that's your only income then $20k will most likely be below the tax free bracket. anyone care to clarify on this.

[egghead]

Hi, Jacmar

My understanding is the same as yours. Just that I did not elaborate (in my example) only $10,000 of the $20,000 withdrawal is subject to tax.

[WolfT]

Yes, only 50% withdrawal is taxable.
Note that the withdrawal period is only 10 years.

For investments in life annuities, the withdrawal period does not apply. So long as you continue to receive your annuity streams in perpetuity, 50% of the annual stream will be subject to tax.

When you die...50% taxable immediately
Under the Income Tax Act, where an SRS member dies, any sum standing in his SRS account shall be deemed to be withdrawn ('Deemed withdrawal' amount) on the date of his death even though no physical withdrawal may have been made on that day.

http://www.iras.gov.sg/irasHome/page04.aspx?id=3346

[egghead]

When you die...50% taxable immediately
Under the Income Tax Act, where an SRS member dies, any sum standing in his SRS account shall be deemed to be withdrawn ('Deemed withdrawal' amount) on the date of his death even though no physical withdrawal may have been made on that day.

Die die must pay

[Contrarian]

If you can be a serious investor, does not make sense to put $ in SRS. Because you CANNOT invest beyond STI... that's a big minus

[Caelitus]

If one had invested in First REIT using SRS and has hit the maximum contribution limit for the year, he/she would be caught out by the placement? If true, therein lies a drawback of the SRS investment scheme.

[egghead]

If one had invested in First REIT using SRS and has hit the maximum contribution limit for the year, he/she would be caught out by the placement? If true, therein lies a drawback of the SRS investment scheme.

Yes, as I pointed out earlier (see #19 of this thread).

[Caelitus]

Egghead, sorry I forgot about your post #19 as I happened to thinking about First REIT then. Did not scroll back to check if I am repeating a point.

Palantir, each SRS bank should have a schedule of SRS charges. I opened mine with DBS. Charges are illustrated below over and above what the brokerage will charge.

I opened my SRS account on 16 Nov and bought my first SRS shares (Singtel) on 23 Nov. I bought 3 lots and left some monies as a buffer.

Transaction cost (SRS), $2.50 per 1,000 shares = $(2.5)*(3) = $7.50
Quarterly charge (SRS), $2 per counter (minimum of $5) = $5.
(a) Projecting 1 year ahead of charges= $(5)*4 + $7.50 = $27.50
(b) Cost of shares: $9,422.90
Total cost (including SRS charges i.e transaction and management)= (a) + (b) = $9,450.40

Singtel Dividends (assuming no change)= $(0.09 + 0.068)*(3000) = $474
Yield on cost = 5.0 %
Tax saved for YA2013 (11.5%) = $1,466.25

[egghead]

Caelitus

Just wondering if you compared the charges of all SRS banks before deciding on DBS. Thanks!

[aspeed]

Egghead, sorry I forgot about your post #19 as I happened to thinking about First REIT then. Did not scroll back to check if I am repeating a point.

Palantir, each SRS bank should have a schedule of SRS charges. I opened mine with DBS. Charges are illustrated below over and above what the brokerage will charge.

I opened my SRS account on 16 Nov and bought my first SRS shares (Singtel) on 23 Nov. I bought 3 lots and left some monies as a buffer.

Transaction cost (SRS), $2.50 per 1,000 shares = $(2.5)*(3) = $7.50
Quarterly charge (SRS), $2 per counter (minimum of $5) = $5.
(a) Projecting 1 year ahead of charges= $(5)*4 + $7.50 = $27.50
(b) Cost of shares: $9,422.90
Total cost (including SRS charges i.e transaction and management)= (a) + (b) = $9,450.40

Singtel Dividends (assuming no change)= $(0.09 + 0.068)*(3000) = $474
Yield on cost = 5.0 %
Tax saved for YA2013 (11.5%) = $1,466.25

All charges are waived since start of SRS till now. Who knows when they will start charging. But would be interesting to know how are they going to deduct charges if all available fund in SRS are invested. deduct from saving account or compounded till withdrawal age?