07 Jun 2019
At what income bracket does it become worth topping up SA / SRS, to enjoy tax savings? I'm 26, earning $28,000 and paying tax of $160 a year – not sure if that's worth?
As a young adult, should we just pay the few hundreds as tax to the government, but that's a cash outflow? Or should we invest more money into SA/SRS to get a small tax relief, but lock up that money (which could've been invested) until near retirement?
At what annual income / age range does it start making sense for us to top up SA / SRS?
If you have spare cash for investment, i would say to try to grab the lower hanging fruits first. Plan for CPF-SA top up first till you reach a combined amount of $60,000 (inclusive of OA, MA, SA) to take advantage of the extra 1% interest (5% for SA, 3.5% for OA). This will likely form the bond component for your retirement.
Once this is in place, consider putting to SRS where you have more flexibility to invest in SGX stocks, withdrawal (with a penalty of 5% before statutory retirement age of 62 currently, or first $400k (since 50% will be tax deductible) no penalty after withdrawal for a period of 10 years. Of course, you will need to learn more about investing.
The tax-relief will start to make a difference only once your assessable income is above $80,000 (where the tax rate is at 11.5%). Meaning to say, every $1000 put into SRS/RSTU will reduce your tax payable by $115.00
At 7% (between $40,000 to $80,000), it is debatable because every $1,000 you put in will reduce your tax payable by $70.00.
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I would not recommend topping up your SA as you may need the cash in the near future. I would recomm...
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