The Supplementary Retirement Scheme (SRS)

The Supplementary Retirement Scheme (SRS) is a “supplement” to the CPF retirement savings J

Contributions to the SRS are eligible for tax relief. Investment returns are tax-free before withdrawal and only 50% of SRS withdrawn are taxable, so u can also consider it as a tax-deferred retirement account. However as the first $20K of your income in Singapore is non-taxable, if u withdraw $20K from your SRS annually, it would not be taxed.

You can make up to $12,750 to your SRS account yearly to enjoy the tax relief. Only local banks (DBS, OCBC and UOB) can allow your SRS application. If you are say an existing DBS account holder, it is an instantaneous open of an SRS account through internet banking.  

http://www.dbs.com.sg/personal/investments/srs-and-cpf/supplementary-retirement-scheme

You can then utilize your SRS funds to purchase shares or other financial products. For example, if u feel that OCBC bank is a good long term investment, instead of using cash to purchase straight from the stock market, u can instead transfer this into your SRS fund, and inform your remisier to use your SRS account to purchase OCBC shares. Hence you will obtain both tax relief benefits as well as investment opportunities.  Cheers!  :)
 

 

Tax Avoidance vs Tax Evasion

With the end of the 2014 year approaching, there's a flurry of activities to pay less tax  :)

There's $12,750 for the SRS. Topping up of own $7K CPF Special account. Topping up of loved ones $7K CPF special account, giving to Charity organizations etc. All these have to be completed by end Dec 2014, for tax reliefs to be applicable for Income Tax Year of Assessment 2014

Tax avoidance, is legal and even encouraged by the country, as it helps to offset other family and social costs. For example planning for a comfortable retirement for self & loved ones (family) or contributing to charities (social).

Tax evasions, however is illegal and involve penalties when caught by IRAS. Examples are failure to appropriately declare your property rental income, or under-declaring your other business incomes.

For working mothers with children, the working mother child relief is a big tax relief, to encourage mothers to continue working. 15% of work income for the first child, 20% for the second and 25% for the third child. Hence for a mother with 3 kids, 60% of her income would not be taxed.

For a list of tax reliefs, you can check out
http://www.iras.gov.sg/irasHome/page.aspx?id=110

 

You can also use the tax calculator, to plan your tax reliefs with your spouse
http://iras.gov.sg/irashome/taxcalculators.aspx

Thank you for your part in nation building!  :)

Setting aside at least 6 months of cash savings for emergencies

With an increasing culture of spending instead of saving, temptation of protection through too much insurance - when u are probably worth more dead than alive, cash is really king during emergencies or in between jobs

 

To offset inflation while holding cash, there are some suggestions

 

a.  OCBC 360 account with 3.05% interest up to 50K

http://www.ocbc.com.sg/personal-banking/accounts/360-account.html

1% for crediting salary, 1% for paying 3 online bills, 1% for $400 spend on ocbc cards

 

 

b. CIMB savings account with 0.8% interest

http://www.cimbbank.com.sg/index.php?ch=sg_per_st&pg=sg_per_st_cur&ac=12

monthly increment/lump sum of $500 to enjoy 0.8% for checking current account, or $100 monthly increment for savings account

c. Standard chartered bonus$aver account with 1.88% interest up to 25K

https://www.sc.com/sg/save/current-bonussaver.html?pid=S:SCBMN:N:SG-P:SB-M:O-R:NA-L:NA-O:NA-D:141101-10002125

monthly spend of $500 in Stanchart credit cards to enjoy 1.88% interest

Last Will and Testament

There's a common saying that death and taxes, are the only guaranteed things in life. Fortunately in Singapore, death taxes were eliminated a few years back, so that makes death/estate planning a bit easier.

Writing a Will is one of the most important aspects in financial planning because it forces us to think who are the real important persons in our lives, that we truly trust and love. Moving forward, we should strive to spend a greater portion of our time with our loved ones  :-)

In general, the executor is the most important in the will, as he is the middleman between your will and your beneficiaries.

Usually the first executor is the spouse, second executors are close siblings or close friends etc.

The executor would usually be the one who holds the death certificate, and going to the various financial institutions (banks, insurance companies etc) to claims the estate assets. The executor will also have to pay off all your existing debts (eg. hospital bills, funeral expanses etc) before distributing the remaining to the beneficiaries.

If the children are minors, he will have to hold the assets until they are adults. Hence It is better for the executor to also be the guardian of your children, as he/she is holding on to all your estate cash and assets

The executor can also be the beneficiary of your will, but the witnesses should be independent and non-beneficiaries

To prevent loss of your will, u can say sign 3 copies of the same will, 1 keep yourself, the other 2 kept by your first and second executor

Notes:
1.  HDB (joint-tenancy) homes are not under will assets, unless they are under co-ownership.
2. CPF monies are distributed under CPF nominations first. Only if there is no CPF nomination, would it be under will estate
3.  If u have purchased some NTUC insurance plans many yrs back when NTUC is a full cooperative, you might want to confirm with your agent. Apart from NTUC, all insurance claims are now under Will