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Why Topping Up Your SRS Account Without Investing Doesn’t Help Your Retirement Adequacy

Topping up your SRS account but not investing your SRS monies wouldn’t do much good for your retirement.

This article is written in collaboration with dollarDEX. All views expressed in this article are the independent opinion of

The year-end period is a time when many people would start looking at (legal) ways to help them reduce their income tax. In Singapore, one of the best ways to reduce your income tax – and plan towards your retirement at the same time – is through the Supplementary Retirement Scheme (SRS).

SRS is part of the government’s multi-pronged strategy for tackling the retirement needs of people in Singapore. Unlike the CPF scheme, making contributions to your SRS account is completely voluntary.

The main benefit of SRS is that any contributions made to your SRS account will be eligible for tax relief. Singaporeans and Permanent Residents (PRs) can contribute a maximum of $15,300 each year, while the cap for foreigners who are working in Singapore is $35,700.

Read Also: Complete Guide To Supplementary Retirement Scheme (SRS) Account For Foreigners In Singapore

In addition, only 50% of the withdrawal amount made each year from your SRS account after the statutory retirement age (currently 62) will be subject to personal income tax.

For example, if you withdraw $20,000 in a calendar year from your SRS account after the retirement age, only $10,000 will be considered as taxable income. And since the tax rate on first $20,000 of income each year is 0%, it’s possible that you don’t pay any income tax on your SRS withdrawals if you plan ahead.

Essentially, SRS allows you to lower your income tax today while contributing to your retirement nest egg. At the same time, when withdrawals are made during retirement, you’ll enjoy a ‘discount’ on the tax payable on your withdrawals.

Reducing Your Income Tax Is Good, But It’s Not Enough For Your Retirement

Saving money for your retirement is good, but it isn’t enough. That’s because inflation can easily eat away  the value of our savings, so what we save today for our retirement isn’t going to be worth as much in the future.

The same principal applies to our SRS savings. While it’s good that we make contributions to our retirement nest egg and reduce our income tax today at the same time, doing this alone isn’t quite enough.

That’s because unlike funds in our CPF accounts, savings in our SRS accounts will only earn us a nominal interest rate of 0.05% per annum from any of the three local banks that we open an SRS account with.

If we want meaningful growth for the savings in our SRS account, we need to invest our SRS monies.

For example, if we contribute $10,000 to our SRS account at age 52, we’ll have a 10-year period before we can start making penalty-free withdrawals from our SRS account. At a return of 5% per annum, we would be able to grow our SRS savings from $10,000 to about $16,289 after 10 years. If we started earlier, at age 42, we would have 20 years to grow the same $10,000 savings to $26,533.

Start By Taking Small, Early Steps Through Dollar-Cost Averaging

According to the Monetary Authority of Singapore, about one-third of SRS funds are left uninvested.

While most SRS account holders are drawn to the tax savings they can enjoy from the Supplementary Retirement Scheme (SRS), perhaps not all of them are comfortable with investing their SRS monies, since they would have to contend with investment risks.

This is understandable, as there is always an element of risk involved when we invest. And people are generally going to be uncomfortable with the idea that their retirement funds are at risk.

One way to mitigate this risk is through dollar-cost averaging, where we invest a small sum of money regularly, instead of a large sum at one go. For example, if you contribute $5,000 to your SRS account before the end of the year, you do not need to invest this entire amount at once. Rather, you can split it equally and invest $416 each month over the next 12 months.

By using dollar-cost averaging, it allows you to invest without having to time the market. When prices of assets are high, you would buy less units and when prices of assets are low, you would buy more units. In the long-term, you will be paying the average price for the assets and not end up investing at a ‘bad’ time when prices are high.

dollarDEX is an online investment platform by Aviva, which has been around for almost 20 years. It provides affordable access to unit trusts, which you can start investing in using your SRS funds from as low as $100 a month through its regular savings plan (RSP).

Choose The Right Portfolio Based On Your Risk Tolerance

Even though our SRS account is meant for our retirement, we will still have our own risk tolerance level as individual investors.  Depending on your own risk profile, you can choose from Conservative, Moderate, Balanced, Growth, and Aggressive portfolios. You can open a dollarDEX account and find out which is the right portfolio for you by using their intuitive risk questionnaire to determine your risk profile.

If you are already a savvy investor who knows what you want, you can also pick individual unit trusts to invest your SRS monies. The dollarDEX Fund Finder allows you to filter the unit trusts based on various criteria, such as the region you want to invest in, the type of sectors and asset classes and whether or not the unit trusts are SRS-eligible.

Start Investing Your SRS Funds Today

While contributing to your SRS account is a good first step towards planning for your future retirement, it’s probably not good enough on its own to help build the retirement nest egg that you need and want.

At the same time, if you are afraid to invest because you are not sure if it is 1) the right time to invest or 2) the right type of portfolio for you, the dollarDEX platform is a great starting place for you to start investing your SRS monies. You can do so from as little as $100 per month through an RSP and start building a suitable portfolio based on your own identified risk tolerance level.

To encourage SRS account holders to start investing for their retirement, dollarDEX is offering an end-of-year promotion when you can receive up to $30 worth of bonus units* when you start investing with either your cash or SRS monies. This promotion from dollarDEX is available from now till 31 December 2019 for both new and existing clients. Click here to find out more about the promotion.

Eligibility For Promotion Reward* Additional Reward*
New client: Open an account and start investing using cash or SRS $10 worth of bonus units  –
New client: Open an account, start investing and start a RSP of $200/month using cash or SRS and maintain it for 6 months $10 worth of bonus units $20 worth of bonus units
Existing client: Start a new RSP of $200/month using cash or SRS and maintain it for 6 months $30 worth of bonus units


* All bonus units will be invested into the Phillip SGD Money Market Fund.

Terms and conditions apply.