Why you should top up $1 to your Supplementary Retirement Scheme (SRS) account today

You’ve probably read or heard this piece of advice many times in the SeedlyCommunity or among your savvier circle of friends.

“Top up $1 to your Supplementary Retirement Scheme (SRS) account to lock-in your retirement age!”

Wondering why you should do that?

I promise that when you get to the end of this article, you will understand what this is all about (hint: it’s to do with retirement planning and taxes).

And I’ll even show you a step-by-step guide on how to make a top-up to your SRS account .

Here’s why you should contribute $1 to start your SRS account today

Whether you’re a fresh grad who just entered the workforce.

Or a seasoned professional who’s been working for a while.

You’ll eventually start earning more and might want to look for ways to reduce your taxable income .

One of the ways which you can do so is via the Supplementary Retirement Scheme (SRS) which allows you to save for retirement.

While reducing your taxable income by $15,300 every year.

Best of all, if you choose to invest your SRS monies, the investment returns are accumulated tax-free.

The SRS tax relief is also more than what you get if you performed CPF Special Account (CPF SA) top-ups.

If you’ve already maxed out your CPF SA top-ups, you might want to consider SRS top-ups too.

So… why should I open an SRS account today?

Since government policies are updated so often…

Who knows when the government will eventually decide to raise the statutory retirement age from 62 years old to higher?

One workaround is to open an SRS account and deposit $1 to “lock-in” your retirement age first.

Note: don’t put more than that if you’re not really sure how you will use your SRS account to help you in retirement planning yet

Why?

Well… it’s all thanks to this particular paragraph which I found in a 29-page PDF put up by the Ministry of Finance:

Interested?

You can make use of these SRS Account Opening Promotions for 2020:

What is the Supplementary Retirement Scheme (SRS)?

The Supplementary Retirement Scheme was started in 2001 and is part of the Singapore government’s multi-pronged strategy to address the financial needs of a greying population.

It’s basically a way to help Singaporeans to save more for their old age.

Over and on top of their Central Provident Fund (CPF) monies, of course.

Think of the SRS as an extra savings and investment account for retirement planning.

It is a purely voluntary scheme, unlike our CPF, where you can contribute any amount subject to a cap of $15,300 yearly.

You can choose to open your SRS account with any of the following banks in the private sector: DBS, OCBC, or UOB.

Where you will earn the standard 0.05 per cent p.a. return as you would with a regular bank savings account.

But if you want to, you can also use your SRS monies to invest in various financial instruments and products to increase your returns.

What is the difference between topping up SRS vs. CPF special account vs. holding onto cash?

When it comes to retirement planning and tax savings, a lot of people are confused between topping up their SRS Account vs. their CPF SA.

To give you a better overview of what’s the difference and what’re the potential returns you can get, I’ve created a comparison table.

FYI: I’ve also included holding onto cash in your bank savings account as a point of reference too.

SRS vs. CPF vs. Cash	Supplementary Retirement Scheme (SRS)	CPF Special Account (CPF SA)	Cash (Savings Account)
Interest Rate	0.05 per cent p.a. Note: returns can be higher depending on what you choose to invest in	4 to 5 per cent p.a.	0.05 to 2 per cent p.a.
Yearly Contribution Cap	$15,300 (Personal)	$7,000 (Personal) $7,000 (Family member)	No
Tax Deductible?	Yes	Yes	No
Withdrawal Conditions	At 62 years old (retirement age) Note: if withdraw before, subject to 5per cent fee	At 65 years old (default) At 55 years old (if you have met Basic Retirement Sum)	Anytime
How To Start	Open with DBS, OCBC, or UOB	Automatically enrolled for Citizens or PR	Open with any bank

Regardless of what you do, don’t just leave your money in your regular bank savings account which only gives you a paltry 0.05per cent p.a.

At least put it into a high-interest savings account while you figure out if you want to do an SRS or CPF SA top-up.

Now that you have an overview, here’s a more in-depth look at the 3 various options I’ve presented to you.

1) Supplementary Retirement Scheme (SRS)

Pros of Putting My Money in SRS:

• You can lock in your retirement age at 62 years old
• You can save more on tax every year with a higher contribution amount than topping up your CPF SA
• You can withdraw your money before 62 years old (although at a 5per cent fee) if you need the money urgently

Cons of Putting My Money in SRS:

• You get 0.05 per cent p.a. like a regular bank savings account
• You can choose to invest your monies, but the investment returns are non-guaranteed because it depends on your decisions as an investor

2) CPF Special Account (CPF SA)

Pros of Putting My Money in CPF SA:

• You are automatically enrolled and start contributing once you start work (if you’re a Singapore citizen or PR)
• You get 4 to 5per cent p.a guaranteed by the Singapore government
• You can use it as a ‘bond’ option in your portfolio where the maturity is at 55 or 65 years old

Cons of Putting My Money in CPF SA:

• You can only contribute a maximum of $7,000 cash top-up for self-contribution and another $7,000 for family members
• You cannot touch the money until 55 or 65 years old even when you really need it

3) Cash in Bank

Pros of Putting My Money in the Bank:

• You get up to 2 per cent p.a if you have a monthly salary and can fulfil the requirements set by the bank (eg. credit card spend, bill payment, insurance and etc)
• You can withdraw the money anytime
• You can decide what you want to do with your money any time (either to save or invest and earn potentially higher returns)

Cons of Putting My Money in the Bank:

• You don’t get any tax-deductions at all
• Your money will lose its value over time since inflation is much higher than 0.05 per cent p.a. if you just hold on to it and don’t invest it at all

Step-by-Step guide to opening and topping up your SRS account

It’s really simple.

I did it in less than 5 minutes via DBS/POSB’s digibank platform.

Disclaimer: we’re not sponsored, I just decided to open my SRS account with DBS since I have most of my money with them

Step 1: Log in to your bank’s iBanking website

Step 2: Apply for a Supplementary Retirement Scheme account

Just follow the instructions and you should get it opened almost immediately.

Step 3: Make a $1 Top Up to Your SRS Account

Topping up your SRS account is almost like you’re transferring money from one savings account to another.

It’s really that easy!

And that’s it!

SRS Account Opening Promotion 2020: Start Your SRS Account Today with $1

If you’re convinced that an SRS account is useful for your retirement planning and you want to lower your taxes.

Here are some SRS account opening promotions for new SRS account holders (sorry, existing SRS account holders):

SRS Account Opening Promo 2020	New SRS Account Opening Promo	Gift	Invest With New SRS Account Promo	Additional Gift	Valid Till
DBS/POSB SRS Promo	Open new SRS Account via digibank (online) & contribute min $10,000 First 4,000	$50 cash gift	Purchase Unit Trusts and/or Insurance with new SRS Account funds via digibank or at any DBS/POSB Branch First 4,000	$30 cash gift ($1,000 to $5,000)	Dec 6, 2020
				$40 cash gift ($5,001 to $10,000)
				$50 cash gift (more than $10,000)
OCBC SRS Promo	Open new SRS Account & contribute min $10,000 within 7 days of account opening First 2,000	$50 FairPrice e-voucher	-		Dec 31, 2020
UOB SRS Promo	Not announced yet (hopefully), will update if they do release details

So there you have it!

I hope this helps you to think about how an SRS account can help in your retirement planning.

While lowering your taxes!