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Anonymous
Tax rate 7%. Regretted that I did nothing last year, so am thinking to reduce tax this year. However, I'm unsure to what extent should I use to reduce income tax (MA, SA or SRS) vs invest. Can provide me with some advice?
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Elijah Lee
15 Nov 2020
Senior Financial Services Manager at Phillip Securities (Jurong East)
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Hi anon,
Incidentally I was just discussing this with my client earlier today since it's SRS season. You'll have to decide for yourself which you prefer. Or, you could do a mix of all 3.
To summarize key points to consider:
MA Pros
Tax relief, 4% interest
Can use for mediscal insurance, careshield supplements, etc
Once BHS reached, excess contributions/interest spill to SA or OA
MA Cons
It's quite one way. MA monies are generally unable to be withdrawn except in exceptional circumstances or for chronic illnesses, etc
Unable to invest MA monies.
SA Pros
Tax relief, 4% interest
It's for your retirement!
SA Cons
Quite one way also. There's almost no way to take out the monies anytime before 55.
Investment options are limited, and most options can't beat the 4% interest anyway
Withdrawal subjected to CPF rules which can be changed
SRS Pros
Tax Relief
Plenty of investment options
It's for your retirement! You will definitely be able to take out at the retirement age of 62 if you open your SRS account this year, regardless of what the retirement age shifts to in future.
You can still take out your monies in a really dire situation, with a 5% penalty. But if it was really that dire and you had $300K in your SRS, what's a 5% penalty when you critically needed the cold hard cash?
SRS Cons