SRS
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financial_guru:
It is still the usual endownment and UTs for OA I guess
At least SG govt good in giving extra 1% interest for 1st 60K in CPF accounts. If you have spare OA to spare, there are some CPF investment schemes to consider.daddy2007:
Actually what I am afraid most is that the government will change/tweak some policies on SRS account down the way. One will never know what rules will be changed 10 - 15 years later
Just like money in the CPF. Every now & then got new rules & policies. Don't really feel like the $ in the CPF is mine. All subject to the latest rules & regulations....sigh -
30plus:
Cash in your hand is the safest. Equip one with financial literacy and manage own investment fund
What you said is correct. It is kind of sovereign risk.
The problem is that there is not much you can do if you want to live in this country, or any country. You can only hope things will not go that bad.
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yupapa:
100% returns after 3 years is very good wah. Easily counter the inflation of 4-5%.Intended to withdraw early to make other investment to counter the inflation.
re the penalty. Say I put in 10K 3 years ago, and say my tax bracket is 10%. I saved 1K.
Now, say the amount has grown into 20K after some shares investment. If I were to withdraw now, assuming the tax bracket remain unchanged for easy calculatation, I would have to pay penalty of 3K (5%+tax on 20K). To me, that's very discouraging, just because I changed my mind re how best to preserve the value of my savings. It is my money after all, not govt grant/share or anything of that sort.
Since you invest in shares, you should be minimally get 7-8% annual return. Still beating inflation if this is your objective
Don’t invest to beat the markets, get rich, or earn the highest possible return. Invest to meet our goals, whether it’s buying a home, putting the kid through tertiary education, or paying for our own retirement -
financial_guru:
The fund manager is the ultimate winner for unit trust investment
If you want more flexibility, you should be looking at using your cash to
invest directly in unit trusts.financial_guru:
Tier 1 Dividend paid by companies (thru shares investment) are not taxable tooThere are no capital gains taxes and unit trust dividends paid to you are not taxable.
Don't think Capital Gain Tax is applicable to us here right -
daddy2007:
There are some good fund managers with good track records.
The fund manager is the ultimate winner for unit trust investment
Tier 1 Dividend paid by companies (thru shares investment) are not taxable too
Don't think Capital Gain Tax is applicable to us here right
SG got no capital gains taxes. -
financial_guru:
If you are lucky that you can pick the next good fund manager with good track records. This has not taken into consideration that good fund manager will leave and join hedge fund companies. So one has another risk to consider if one chose a fund due to the \"star\" fund manager.
There are some good fund managers with good track records.
If one compare the past Lipper Singapore Fund Awards or Morningstar Fund Awards, how many funds are consistently holding to that position/award? This has not factored in the survival-ship biasness
All fund factsheet/prospectus will have a clause \"Past Performance are not necessarily indicative of the future or likely performance of the fund\". If that particular fund is confident that it can consistently perform based on past record, why need to put in this clause? Using this approach is like driving using a rear mirror
We must also understand how typically the fund manager is evaluated and remunerated. Quarterly they will be assessed by their boss how they are compared to their peer or benchmark. So if they can't meet the target, they will start to do silly things. I will not elaborate. Just look at the fund's expense ratio and turnover ratio and one will guess what has happened.
The fund manager job is to manage fund. So their 1st objective is to ensure that the fund that they manage will minimally keep close to the benchmark. At least their job is safe by not deviate from the benchmark too much. So they will construct their majority portfolio that mimic what stocks of the benchmark. The remaining portion they will try to pick stocks that will outperform to generate the alpha. So see if you are lucky one that pick the correct fund manager to generate that alpha for you
Personally I use UTs to generate short term returns (1-2 years). For longer term investment, there are better and lower cost alternative out there.
PS: I don't work in financial/insurance industry. Just an ordinary singaporean who has been enlighten that on one cares about your wealth other than yourself. Wealth accumulation should be one’s responsibility. -
financial_guru:
If you want more flexibility, you should be looking at using your cash to
invest directly in unit trusts
There are no capital gains taxes and unit trust dividends paid to you are not taxable.financial_guru:
SG got no capital gains taxes.
Err.... If there is no capital gains taxes, then why mention it in the 1st place -
daddy2007:
Just wanted to let you know SG don't have cap gains taxfinancial_guru:
If you want more flexibility, you should be looking at using your cash to
invest directly in unit trusts
There are no capital gains taxes and unit trust dividends paid to you are not taxable.financial_guru:
SG got no capital gains taxes.
Err.... If there is no capital gains taxes, then why mention it in the 1st place
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There’s no capital gains tax in Singapore, though "capital gains" can be taxable if that is part of your business activities.
But the problem with SRS is that gains that are capital in nature gets lumped together with your initial contribution (which would otherwise have been taxable) and taxed at the point of withdrawal. If you start contributing to SRS at 30, it’s not inconceivable that you would have quadruple your initial amount after 30 years. You’ll be taxed on 50% of that, which is still double the amount of assessable income you had tax deduction on. And if you withdraw 30 years of contribution over 10 years (max), you’re unlikely to fall outside the tax net.
My view is that, from a tax perspective, SRS makes sense if you’re older and close to retirement, not for someone younger who have many years for the fund to grow many fold. For younger people, it’s better to invest it as cash and not have to pay tax on the capital gains.
This situation is rather unfortunate as it’s best to start investing early and give your investments time to grow. The tax treatment for SRS withdrawals makes it an unattractive avenue to do so. -
rosemummy:
SRS contribution will only be beneficial if one's tax chargeable income is > $80k. This will probably applicable to mid-career people (e.g age 40). Unlikely suitable for younger people where typically their annual income is < $60k
My view is that, from a tax perspective, SRS makes sense if you're older and close to retirement, not for someone younger who have many years for the fund to grow many fold. For younger people, it's better to invest it as cash and not have to pay tax on the capital gains.
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