Considerations for setting up my SRS account

Happy 2020!

I have finally opened my SRS account this year after some consideration for 2019 tax relief. I think it might be worthwhile to share what I was considering before deciding to finally lock up my money till I am 62. These might be something that you would want to consider as well before setting up and contributing to your SRS account.

1) Confirm that I have not exceeded the annual $80K tax relief and my contribution will be eligible for tax relief.

2) Amount of tax relief I will be getting. I was using CPF top up to my/my parent Special Account and parent relief to reduce my payable tax for the past few years. Unfortunately, for 2019, my siblings will be claiming for the parent relief instead. Hence I am using SRS to compensate for that portion of tax relief.

3) Can I live without the money till 62? Since there is a 5% withdrawal penalty plus the sum will would fully taxable before 62, the tax savings might not make sense for an early withdrawal.

4) To lock up the withdrawal age for SRS funds to the current retirement age of 62. The retirement age is currently being reviewed to slowly increase to 65 by 2030. You can consider contributing $1 to just lock up the withdrawal age at 62 if you are not ready to commit bigger amount.

5) What are the investment I would be doing with the SRS funds. Since the SRS account only pays 0.05% interest, the money inside would be eaten up by inflation. It is very important to think about what are the investment available with SRS and what fits into my investment appetite. I was considering a passive ETF regular savings plan and I ended up opening an account with OCBC which allows the use of SRS funds for their BCIP (Blue Chip Investment Plan).

Below are some additional resources if you want to find out more about SRS scheme.