Whats your net worth

[lazyplane]

[QUOTE=Unregistered;12477]
We also have been contributing to SRS at the maximum and have been buying high yield blue chip stocks. Have never sold. There was a point during 2009 when our SRS portfolio dropped in value by 40%, but its recovered nicely. Both my wife and I have a total of $300K in both our SRS. That generates about 5% dividends also, which gives us another $6K.

[QUOTE]


Warning about the SRS investment. U mentioned 300k in your SRS account between u and wife. Hopefully, u split it quite evenly between your spouse and you so u can withdraw without paying even more than what u saved.

My rough calculation from the looks of it, u r ok since u have around 10 + years of savings in SRS only which fairly evens it out n if u plan to retire at 55. But if u continue working until 62 (another 7 years) and continue to put into SRS, then your SRS will ballon to around 500k ..

Put it simply, SRS flaw is that ur savings of say 20 years are squeezed into a "dividend" cash flow of 10 years. and if u make lots of $$ in that account, ur divdend cashflow are forced squeezed into 10 years which will incur tax and can be more costly because the "capital gains" earned will also be taxed.

My rough calculations on this.
https://forums.salary.sg/education-pe...etter-you.html

lazyplane, not quite sure I follow your logic

The CPF guy has $300K split between him and his wife or $150K ea in their SRS. Say, after another 7 years, they reach 62 and retire and as you say, their SRS has increased to $500K. They would each have $250K in their SRS. If they each withdraw over 10 years, they take $25K out per year each. Only 50% of the withdrawal is subject to tax, which is $12.5K. In Singapore the tax rate is zero for the first $20K of income, so they pay no tax at all.

It would only be a problem if they continued to work after 62 and earned a lot of money putting them in a high tax bracket. Their other income seems to be dividends and interest from CPF, which are not subject to tax...

[lazyplane]

Originally Posted by Unregistered

lazyplane, not quite sure I follow your logic

The CPF guy has $300K split between him and his wife or $150K ea in their SRS. Say, after another 7 years, they reach 62 and retire and as you say, their SRS has increased to $500K. They would each have $250K in their SRS. If they each withdraw over 10 years, they take $25K out per year each. Only 50% of the withdrawal is subject to tax, which is $12.5K. In Singapore the tax rate is zero for the first $20K of income, so they pay no tax at all.

It would only be a problem if they continued to work after 62 and earned a lot of money putting them in a high tax bracket. Their other income seems to be dividends and interest from CPF, which are not subject to tax...

Sorry for not being clear.

SRS is good for the TS. I think he should continue to use as he coming to retirement soon.

But for younger people, i dont think so.

At the present maximum contribution rate, if you worked and contributed for 30 yrs, you would save around $330K in SRS. Say you put it in good stocks, which grew to $1m. You could take out $100K a year for 10 years, only $50K is taxable and they would pay just $600+ in taxes per year, which is about 0.6% tax rate. Almost nothing!

It should be good savings even if you're young.

[lazyplane]

Originally Posted by Unregistered

At the present maximum contribution rate, if you worked and contributed for 30 yrs, you would save around $330K in SRS. Say you put it in good stocks, which grew to $1m. You could take out $100K a year for 10 years, only $50K is taxable and they would pay just $600+ in taxes per year, which is about 0.6% tax rate. Almost nothing!

It should be good savings even if you're young.

actually u need to try above 2.5 million... n u will see the difference... this is possible if u get overall above 15 percent returns from the market in 30 years

u may find that the savings u saved from srs is less than wht u got because u got taxed for your capital gains

tax is around 8k per year once u have to withdraw above 240k per year... which is more than the 70k u saved from taxes put in srs

i realised this when some of the counters i held got bought out... which gave me a sudden windfall...while i am happy that i made money, i realised i may be getting taxed more now because i used srs instead of cash.....

Lazyplane, you must be a whizzard if you can get 15% return per year for 30 years straight. I don't think normal people can.

The STI is now 3100. If you reverse back 15% for 30 years, it would imply that the STI was just 47 in 1981. Clearly it was much higher than that.

I did a little simple math because I found out that the STI was about 900 points in 1981. The 30 yr compound return excluding dividends is about 4.2%, a far cry from your 15%.

Also, if someone contributes $11K for 30 yrs, his average balance over the period is $170K because in the early years, the balance is small. At 4.2%, you would end up with about $640K. It would need an unrealistic 12% to get $2.5M

You might argue that over time, the Govt will raise the SRS contribution because of inflation even though they actually reduced it dramatically over the last 10 years. However, the tax table will also be adjusted so that wouldn't work either.

[lazyplane]

Ok, so u agree with me that it is misleading to say SRS is always beneficial for high networth individuals whom can get better than above average performance constantly. That is my point actually.

As to whether it is possible for an individual to get those returns is an useless debate.. I feel this kind of debate is best won only by actual proof...

So , I can only say i will know at the end of 20 more years....

Wish me well okie ?

Originally Posted by Unregistered

Lazyplane, you must be a whizzard if you can get 15% return per year for 30 years straight. I don't think normal people can.

The STI is now 3100. If you reverse back 15% for 30 years, it would imply that the STI was just 47 in 1981. Clearly it was much higher than that.

I did a little simple math because I found out that the STI was about 900 points in 1981. The 30 yr compound return excluding dividends is about 4.2%, a far cry from your 15%.

Also, if someone contributes $11K for 30 yrs, his average balance over the period is $170K because in the early years, the balance is small. At 4.2%, you would end up with about $640K. It would need an unrealistic 12% to get $2.5M

You might argue that over time, the Govt will raise the SRS contribution because of inflation even though they actually reduced it dramatically over the last 10 years. However, the tax table will also be adjusted so that wouldn't work either.

Originally Posted by lazyplane

Ok, so u agree with me that it is misleading to say SRS is always beneficial for high networth individuals whom can get better than above average performance constantly. That is my point actually.

As to whether it is possible for an individual to get those returns is an useless debate.. I feel this kind of debate is best won only by actual proof...

So , I can only say i will know at the end of 20 more years....

Wish me well okie ?

Interesting discussion on SRS. I'm of the opinion that liquid instruments are most beneficial. (SRS is not liquid due to the various rules).

That's why I prefer to manage my own investments - cash, stocks and properties.

Keep it simple. Any involvement of additional parties such as fund managers (unit trusts) or CPF / banks (SRS) reduces flexibility and introduces certain risk factors - e.g. SRS rules may change to your detriment.

[lazyplane]

well, i dont think liquidity is too much of a concern for me in the sense i can still trade with $ i put in SRS.. just not in property.

and i like the fact if i ever lose my job for an extended period of time due to whatever reason like medical and i need to withdraw, then SRS become my insurance policy... I think medical ground/compassionate ground dont even get the 5% penatly.

I just hate the concept that i have a "upper" limit to how high i can benefit from this scheme.. It is a conceptual point at the moment for me since i have 20 more years to go, but i feel this is not justified.

But then again, when if i reach that level, it is possible my view may change and i see this as a form of giving back to society...

Originally Posted by Unregistered

Interesting discussion on SRS. I'm of the opinion that liquid instruments are most beneficial. (SRS is not liquid due to the various rules).

That's why I prefer to manage my own investments - cash, stocks and properties.

Keep it simple. Any involvement of additional parties such as fund managers (unit trusts) or CPF / banks (SRS) reduces flexibility and introduces certain risk factors - e.g. SRS rules may change to your detriment.

I think you are overly concerned about this "upper limit". First, you are assuming you can make 15% returns consistently. Unless you are Asia's Warrent Buffett, its quite unlikely. Secondly, even if you do and save your $2.5m in 20 years in SRS, surely the tax table will have risen by then due to inflation and the $250K you withdraw would be subject to much less tax. The reason we haven't seen a significant rise in tax is that while inflation was raising salaries, the Government was cutting tax rates from 30% to 20% to make Singapore more competitive. Rates have probably bottomed so going forward, I would expect the tax table to rise with inflation.