How can you live an enjoyable retirement life in Singapore? Many Singaporeans may have thought about this question. The good news is that there is an answer to the question: have enough retirement funds. When you have sufficient retirement funds, things will be much easier and less stressful.
To prepare for retirement, many Singapore professionals use the Central Provident Fund (CPF) to save for retirement. The CPF savings, however, may not be enough. While 85% of Singapore professionals expect to receive at least SGD 3,500 per month to live a stress-free retirement life, the average payout from CPF ranges between SGD 660 to 1,920 per month at the age of 65.
Similar to CPF, the SRS is also part of the government’s strategy to cater the needs of Singapore working professionals when they reach retirement. However, unlike CPF that is mandatory for all working Singaporeans, having an SRS account is voluntary.
Since SRS contributions are voluntary, you decide for yourself how much money you want to put into your SRS account, although there is a cap for this. What is more, it is also important to know that SRS contributions are eligible for tax relief. You are allowed to purchase as many various investment instruments as you wish, and the investment returns are tax-free before withdrawal. Once you reach the retirement period, only 50% of the SRS withdrawals are taxable
Benefits of having an SRS account
The most noteworthy benefit of having an SRS account is the opportunity to enjoy tax savings while you save for retirement. To understand more about how much money you can save from the tax relief benefit, let’s assume you contribute $15,000 to your SRS account.
- If you are a Singaporean or a Permanent Resident (PR) with an annual taxable income of SGD 60,000, your income tax payable with SRS will be SGD 900, whereas without SRS it will be 1,950 SGD. This means that the total tax savings will be 53.8%.
- If you are a Singaporean or a PR with an annual taxable income of SGD 100,000, your income tax payable with SRS will be SGD 3,925, whereas without SRS it will be SGD 5,650. This means that the total tax savings will be 30.5%.
- If you are a Singaporean or a PR with an annual taxable income of SGD 120,000, your income tax payable with SRS will be SGD 6,225, whereas without SRS it will be SGD 7,950. This means that the total tax savings will be 21.7%.
Another advantage that you can enjoy from having an SRS account, as briefly mentioned above, is that you can buy several investment instruments and the investment returns are tax-free. If you are interested in investing, some of the instruments you can choose include bonds, fixed deposits and insurance.
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