Understand that topping $1 to the SRS account effectively locks in our retirement age at 62. However what does this really mean? Is there any impact on our CPF withdrawal age?
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Elijah Lee
18 Jul 2020
Senior Financial Services Manager at Phillip Securities (Jurong East)
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Gideon Ng
18 Jul 2020
Blogger at FI Pharmacist
Hi Weiyuan,
By topping up your SRS account with $1 now, you are locking the 'retirement age' that you can withdraw from your SRS account.
This means that if you withdraw on or after the prescribed retirement age, you will only be taxed on 50% of the withdrawal sum. (Source)
You are able to withdraw a maximum of $40k per year without having to pay any income tax at all! (Source)
So what the retirement age just means is that you will be able to start withdrawing from your SRS account from 62 years onwards.
Since it was previously announced that the retirement age will increase to 63 in 2022 before being raised further to 65 by 2030, if you don't lock your retirement age before 2022, you can only withdraw funds from your SRS account when you're 63 years old.
I'm not too sure whether it makes any impact on your CPF withdrawal age.
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Hi Weiyuan,
When you open your SRS account, the age whereby you can withdraw your SRS assets (be it cash, stock, etc) penalty free will be set at the prevailing retirement age of that year.
So, with this year's prevailing retirement age at 62, when you open an SRS account this year and put a dollar in, you will lock in the eligiblity age at 62. If 10 years later, the retirement age is raised to 65 and you only open your SRS account in 2030, the earliest age you can take out your SRS holdings is when you turn 65.
As long as you are above 18, you may open an SRS account, and I highly encourage you to do so. Now, you can still take out your SRS holdings before 62 if in a pinch, but you will have to pay a penalty of 5%. Thus it's not that your SRS holdings are held imprisoned till 62, but you will have to be careful to set aside money that you really don't need.
CPF withdrawal age is 55 at the moment and is not impacted by SRS age. That's the age where you can withdraw your OA and SA. For this to change, I believe legislation has to change.