Why SRS accounts are a good way to save

[greengiraffe]

Only you can answer to yourself as everyone is different.

Fully vested portfolio - can always sell nil-paid rights. If cannot sell like CMP then leave it to the mgt lor.

I have used up more than 80% of my SRS to purchase stocks. I am wondering if it is advisable to use up 100%. What options do I have for rights issue if I do not have enough fund left in my SRS account to subscribe to the rights? Thanks.

[thor666]

I have used up more than 80% of my SRS to purchase stocks. I am wondering if it is advisable to use up 100%. What options do I have for rights issue if I do not have enough fund left in my SRS account to subscribe to the rights? Thanks.

For planning purposes, it is better that u hold and invest the last 20% at end of year. Last I checked you cannot buy any more rights if u hit. 100%. Remember that SRS is the custodian and has final say in such situations.

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[touzi]

Fully vested portfolio - can always sell nil-paid rights. If cannot sell like CMP then leave it to the mgt lor.

That is exactly what I am trying to avoid. I do not want to be forced to sell the rights because of SRS rule that disallows me from contributing more in order to subscribe to the rights.

[touzi]

For planning purposes, it is better that u hold and invest the last 20% at end of year. Last I checked you cannot buy any more rights if u hit. 100%. Remember that SRS is the custodian and has final say in such situations.

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Investing the last 20% at year end is also risky because you may need more than 1 year of contribution to subscribe to the rights the next year.

[thor666]

For planning purposes, it is better that u hold and invest the last 20% at end of year. Last I checked you cannot buy any more rights if u hit. 100%. Remember that SRS is the custodian and has final say in such situations.

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Investing the last 20% at year end is also risky because you may need more than 1 year of contribution to subscribe to the rights the next year.

Hi touzi,

I don't think there is a foolproof way out of this.. Personally I am also in the same situation of such a "rights risk". Given that share issuance mandayr is almost always passed in sg stocks agm resolution each year, there is always a theoretical possibility that any stocks can call for rights issue.

Perhaps the best way to avoid such situation is to buy etf and other investment that does not of such exposure.

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[greengiraffe]

Fine-tuning SRS: Ministry of Finance replies


  [url=http://www.straitstimes.com/forum/letters-in-print/fine-tuning-srs-ministry-of-finance-replies#][/url]
Mr Sam Phoen ("Fine-tune SRS to spur take-up"; last Sunday) suggested more favourable tax treatment for Supplementary Retirement Scheme (SRS) withdrawals and for the withdrawal period after retirement to be extended.
The SRS is a tax deferral scheme. Under the SRS, a person's contribution in a year is granted tax relief in the following year.
This tax saving adds to the sum which one can invest and accumulate returns. Taxes are levied only when the taxpayer makes a withdrawal, and even then, only 50 per cent of the savings are taxed.

As most taxpayers would make withdrawals during the retirement years, the effective tax rates would generally be lower. Moreover, withdrawals can be streamed out over 10 years to further reduce tax payable.
We will consider Mr Phoen's other suggestion of extending the SRS withdrawal period as part of our regular SRS policy review, and we thank him for his feedback.
Lim Yuin Chien
Director
Corporate Communications
Ministry of Finance

[Contrarian]

Can some1 enlighten me on this doubt I been having:

I contribute almost every year to SRS to reduce some taxes.
Say 1 year I quit job, so I have very little income, and I need to withdraw some cash.

Say my tax rate was 10% in normal years (after deducting SRS) when I was working.
Next year I dont work, so very little work income. How to compute the tax rate if I withdraw and penalty amount?

Thank you to all experts on SRS here...

[Bluechipfan]

Can some1 enlighten me on this doubt I been having:

I contribute almost every year to SRS to reduce some taxes.
Say 1 year I quit job, so I have very little income, and I need to withdraw some cash.

Say my tax rate was 10% in normal years (after deducting SRS) when I was working.
Next year I dont work, so very little work income.  How to compute the tax rate if I withdraw and penalty amount?

Thank you to all experts on SRS here...


you you pay a flat 5% for whatever amount withdraw. In addition, if the amount you withdraw is large enough to attract income tax, then you have to pay the tax accordingly. 

[Contrarian]

Bro Bluechipfan,

Thank you for fast reply.

Do u mean if I withdraw $10,000 next year. And next year my tax rate is 5%.

I pay $500 (5% of $10,000) + 5% next year tax rate X $10,000 withdrawn = $1,000?

[Bluechipfan]

Bro Bluechipfan,

Thank you for fast reply.

Do u mean if I withdraw $10,000 next year.  And next year my tax rate is 5%.

I pay $500 (5% of $10,000) + 5% next year tax rate X $10,000 withdrawn =  $1,000?

Hi, if you withdraw $10,000/- and have no other income, you just pay the 5% penalty ($500/-). This is because tax rate for first $20,000/- is 0%. If you have other income such as rental that exceed $20,000/- after all eligible deductible, then you have to pay tax accordingly. For further reference, you may want to check up IRAS site https://www.iras.gov.sg/irashome/Individ...Tax-Rates/  

If I may add, say if you have rental income of more than 10K, you would have to pay according to the prevailing tax rates, as your rental income and SRS withdrawal would have exceeded $20,000/-.