Have you maximized your contributions to your Supplementary Retirement Scheme (SRS) account? With just 2 months away before we end the year 2024, this is a reminder to those who planned to but yet to maximize your contributions to your SRS account. In October, I have maxed out my contribution of S$15,300 to my SRS account. What is the benefit? Why am I contributing money to SRS where I cannot withdraw the money out now?
I contributed money on a regular basis to my SRS account for two purposes: SRS tax relief and for retirement saving. I will share more below on how SRS works and what are the benefits.
Before I share the benefits, what is SRS? The Supplementary Retirement Scheme (SRS) is a voluntary savings scheme in Singapore that complements the Central Provident Fund (CPF) for retirement planning. It was introduced by the government in 2001 to encourage individuals to save more for their retirement and reduce the reliance on government assistance in old age.
How does the SRS Account work?
Any individual who is a Singaporean citizen, Permanent Resident, or foreigner with a valid employment pass can open an SRS account with one of the three local banks (DBS, UOB, OCBC) in Singapore. For myself, I have an SRS account with OCBC. Contributions made to the SRS account are eligible for tax relief, making it an attractive option for individuals looking to reduce their taxable income.
The funds in the SRS account can also be invested in a wide range of financial products such as stocks, bonds, unit trusts, and insurance products. For example, you can use your funds in the SRS account to purchase Singapore Treasury Bills, Singapore Savings Bonds and even some Endowment plans.
When you make your first contribution to the SRS account, the retirement age where you can start withdrawal will be locked down. Any subsequent change in the statutory retirement age (e.g. up to age 65) will not affect you. For example, I can start making penalty-free withdrawals from my SRS account at the age of 62.
Only 50% of the withdrawals are taxable at retirement, and the remaining 50% can be tax-free. Withdrawals from SRS accounts are subject to tax in the Year of Assessment following the year of withdrawal.
For the first S$20,000 in 2024, the income tax rate remains at 0%. This means that you can withdraw S$20,000 without paying taxes if you are eligible to withdraw money from your SRS account in 2024.
There is no maximum contribution limit for the SRS account, but there is a cap on the total amount that can be saved in the account over the individual’s lifetime.
Benefits of the SRS Account
Tax savings
Contributions to the SRS account can help individuals reduce their taxable income and potentially lower their tax bills.
Retirement planning
The SRS account provides a supplementary source of income during retirement, in addition to CPF savings and other investments.
Investment opportunities
The SRS account allows individuals to invest in a wide range of financial products to potentially grow their retirement savings. As shared above, you can use your funds in the SRS account to purchase Singapore Treasury Bills, Singapore Savings Bonds and even some Endowment plans.
Conclusion
The Supplementary Retirement Scheme (SRS) account is a valuable tool for retirement planning in Singapore, offering tax benefits, investment opportunities, and flexibility for individuals looking to save more for their golden years. By taking advantage of the SRS account, individuals can enhance their retirement savings and enjoy a more financially secure future.
Do you have an SRS account, and have you maximized your savings?
there is a cap on the total amount that can be saved in the account over the individual’s lifetime.
^ never knew about this. what’s the cap?