SRS Top Ups And Why Some People Do It

SRS (Supplementary Retirement Scheme) top-ups are a hot topic amongst Singaporeans who have discovered this option.

There are certainly some benefits but, is it for you? This short article will give you an insight into your options.

Of course, when it comes to your finances, it can become complex, and you should always consider your overall financial positions and goals when making any financial decisions...and that’s why you should always speak to a professional when you are considering making any changes...a professional like me! Tap here to book a session with me.

Firstly, contributions to your SRS account are voluntary.

SRS, simply put, was put in place by our government to help you increase your retirement savings beyond your basic CPF.

So, you make your contributions, (currently capped at $15,300 per year for Singaporeans and $35,700 for foreigners) and you can then use your contributions to purchase investment instruments (such as ETFs) which are aligned with your future goals.

When you make your first contribution, you lock in your retirement age...which in Singapore is currently 62...but with an ageing population, that could change in the coming generations.

OK, but what makes SRS any different to just topping up your CPF Special Account? Your CPF Special Account addition contributions are capped at $7000 for you and $7000 for your family member.

Additionally, your SRS funds can be withdrawn at the age of 62, compared to 65 with your CPF. And, if you really do need to withdraw your funds before the age of 62, you will have that option, albeit with a 5% fee.

And your voluntary contributions to your SRS are also eligible for a dollar-for-dollar tax relief of up to $15,300. Depending on your income and tax bracket, it could make complete financial sense to be contributing to an SRS.

Sounds great, doesn’t it? Well, as with everything there are upsides and downsides to SRS.

The base rate of the normal savings in SRS is only 0.05%, which is very similar to a standard savings account with a bank. Really nothing special when compared to the 4 to 5% per annum returns given by the government on your CPF SA account.

However, if you invest your SRS funds correctly, you could receive a return of 6-7% per annum. But these are not guaranteed returns, and if not managed correctly or if you make poor investment decisions, your investment could yield poor returns.

Conclusion

Contributing to your SRS is a great option for many Singaporeans with many benefits, can be fairly straightforward to begin and are a solid way to start disciplined long term investing. But, as with all financial decisions, there are certain risks involved. However, the risks can be mitigated with proper planning and management.

If you have not considered SRS yet, or even if you have started your research but just need clarity on the matter...message me or book me for an informal introductory session and we can look at how we can help you grow.