The Supplementary Retirement Scheme (SRS) is a government-supported investment plan in Singapore that allows individuals to make additional contributions to their retirement savings on a voluntary basis. The scheme offers significant tax benefits and allows individuals to diversify their investment portfolio.
If you’re looking to maximise your savings with the SRS, here are some tips and tricks to help you get the most out of this investment plan.
1. Plan your contributions:
The first step to maximising your savings with the SRS is to plan your contributions. The maximum amount that can be contributed to the SRS account each year is $15,300 for Singaporeans, and $35,700 for foreigners. You’ll want to make sure that you’re not exceeding these limits, but also that you’re contributing enough to make the most of the tax benefits offered by the SRS.
2. Take advantage of tax relief:
One of the main advantages of the SRS is that it offers significant tax benefits. Contributions to the SRS account are eligible for tax relief, and the investment returns on the SRS account are not subjected to tax, as long as they are still in your SRS account. This means that individuals can save more for their retirement and enjoy the benefits of compound interest without having to pay or paying discounted taxes on their investment returns. Be sure to take full advantage of the tax relief offered by the SRS.
Read more about How to Use SRS for tax relief here.
3. . Plan your withdrawals:
It’s important to plan for withdrawals from your SRS account, as well as to understand the penalties associated with early withdrawals. Withdrawals can only be made after the statutory retirement age of 63 (as of January 2023), or withdrawals will be subject to tax, on top of a 5% penalty. So it’s best to plan your withdrawals to maximise your tax benefits by withdrawing in the first 10 years after you reach the statutory retirement age, where only 50% of your SRS withdrawals are subjected to tax. After these 10 years, 100% of your SRS withdrawals will be subjected to tax. That’s why to maximise your savings and SRS investments, you need to be strategic about your withdrawals.
Learn how to maximise your SRS Withdrawals here.
4. Diversify your investment portfolio:
Another advantage of the SRS is that it lets you diversify your investment portfolio. The SRS account can be used to invest in a wide range of products such as stocks, bonds, unit trusts, and endowment policies. This allows you to spread your risk and potentially earn higher returns on their investments. It is strongly advised to invest your SRS funds because they will only earn a meagre 0.05%p.a. return, when uninvested. Since this rate is substantially lower than inflation, when you eventually retire, the value of your uninvested SRS funds will be lesser. To maximise your savings and SRS investments, you should invest and diversify your investing portfolio.
Find out what type of SRS Investments are suitable based on your goals and risk appetite here.
5. Take advantage of compound interest by starting early:
Compound interest is the interest on interest, and it can help you to maximise your savings over time. The earlier you start contributing to your SRS account, the more time your money has to grow through compound interest. The longer your money is invested, the more it will grow, and the more you will have saved for your retirement. Be sure to take advantage of compound interest by leaving your money invested for as long as possible.
6. Review your investments regularly:
As your investment needs and goals change over time, it is important to review your investments regularly and make adjustments as needed. This will help you to ensure that your investments are aligned with your goals and that you are making the most of your SRS contributions.
7. Make regular contributions:
Making regular contributions to your SRS account can help you maximise your savings over time. Consistency is one of the most important factors when accumulating wealth. Consider setting up a standing instruction or automatic transfer from your bank account to make regular contributions to your SRS account. This reduces the friction and effort needed to make SRS contributions, and will help you to save more for your retirement without having to think about it.
8. Take advantage of bonus interest rates:
Some banks and financial institutions offer bonus interest rates for SRS accounts. These bonus interest rates can help you to maximise your savings over time. Be sure to take advantage of bonus interest rates by shopping around for the best deal.
In conclusion, to maximise your savings with the Supplementary Retirement Scheme (SRS), you have to plan your investments and withdrawals, take advantage of the tax relief provided, compound interest by contributing consistently early and bonus interest rates offered by banks.
Want to know more about SRS? Read our post on What is SRS here.
Need help with SRS investments? Speak with our professional consultants here.
This is for general information only and does not constitute financial advice. This advertisement has not been reviewed by the Monetary Authority of Singapore.