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.
30plus:i would say the penalty is reasonable. being an optional retirement scheme, it does not suit everyone. it is not a saving account for your emergency money as well. so you need to make a decision before you put in money.
if your marginal tax rate is less than 8.x% bracket, you should consider not using it because the saving is small.
now assume you are in this bracket, you save 8% tax upfront. at retirement, you can spread the withdraw in 10 years and will be taxed for 50% of it. assuming you do not have income at that time and tax structure does not change, rough computation can show that you will pay pretty negligible tax.
if you need to withdraw early, then the question is why? you need to buy a house urgently? need to pay a ransom? to me, the most reasonable case is that you suddenly lost income. if this is the case, then you need to pay 5% penalty + currently tax. if you lost income, then the total penalty is not far away from the tax you have saved.
btw, once you open the SRS account, your withdraw age is fixed. further increase on retirement age does not have impact on you.
