Should I contribute in SRS?

Hi anon,

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I seek some clarity on your numbers, is this your take home income or your gross? If this is your gross income, then it would be reasonable to assume that you already have some relief from compulsory CPF contributions, which should be 20% of $65000 and thus work out to be $13K. Including earned income relief of $1K, you would already have $14K of reliefs. This brings your chargeable income down to $51K.

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You only really need to find a way to 'park' $11K of income away, but parting with $11K of income will only save you $770.

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RSTU and VC-MA are options which will earn you a decent return and can bring your chargeable income down a further $8K. With this, you're down to $550 + $3K * 7% = $760 or about $60+ a month. Would that be acceptable to you? This is also assuming that you do not have any other reliefs that are automatically granted to you, e.g. NSman relief (that's $3K already if you did your reservist), assuming you are a male.

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Check on all your allowable reliefs and if they bring your chargeable income down sufficiently, you may not even need to contribute to SRS.

At $65k, your income tax would be $550 + $25k x 7% = $2300.

If you manage to park $25k for tax relief, you would save 7%, which is $1750.

There are 3 places you can park to get tax relief:

1. CPF MA - do a VC-MA for up to $8k tax relief.
2. CPF SA - do RSTU for up to $8k tax relief, but this $8k is shared with VC-MA.
3. SRS - do a $15.3k contribution to SRS.

You can use your MA money to pay for your Integrated Shield Plan premium right away. Don't need to wait.

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For SA, the top up amount plus its interests will be reserved for RA at 55. After RA formed with FRS, you can freely withraw remaining SA money after 55 (not 60+).

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For SRS, you should invest the money for higher than SRS 0.05% interest rates. You can actually withdraw SRS money even before 62, just that there would be 5% penalty and 100% taxable. Ideally you should only withdraw after 62 without penalty and 50% taxable.