ETFs are available for purchase with cash, CPF, and SRS money. When you buy ETFs with your CPF or SRS money, you’re using funds that you won’t need in the near future because they’re both set aside for your retirement.
Index Funds and ETFs for SRS
You can utilize index funds or ETFs to implement a passive investment strategy. Here are a few of the most popular choices:
Some Dimensional Fund Advisors smart beta funds are approved under the SRS system, however you must go through a Dimensional trained adviser.
If you wish to learn more about Dimensional funds, please contact me using the form below.
Stocks and REITs for SRS
To do so, contact your stockbroker and have your SRS Investment bank account information updated. To conduct an SRS stocks trade, pick the option “SRS” under “trading type” after the linkage has been formed. Please keep in mind that “Contra” is not an option for SRS trades.
You can buy most individual stocks and real estate investment trusts listed on SGX using SRS, but I don’t recommend it. Why?
Individual stocks and REITs are susceptible to corporate actions, which might be confusing if you aren’t using cash to invest.
For example, if a corporation issues rights, you must top up to avoid your shares from being diluted, but you may not have enough SRS balance or be unable to top up if your yearly SRS contribution maximum has been reached.
However, if you are serious about investing in stocks, you have a few possibilities.
Some brokers will manage corporate activities for you (but not flawlessly), so read the terms of each investment account carefully. Also, keep in mind that the brokerage cost for small investment accounts is not favorable.
What’s my take on it? Most individual investors would be better suited using an SRS account to invest in funds and ETFs.
Tax Considerations When Using SRS to Invest
I have discussed the tax implications of purchasing insurance through SRS. All revenues from the sale of your SRS investments will be refunded to my SRS account if you utilize SRS to invest. The tax will be applied to the amount removed from the SRS account after that. Following the conclusion of the 10-year withdrawal period, the money in the SRS account will be deemed withdrawn, and 50% of the balance will be liable to tax.
In general, Singapore uses a one-tier exemption structure for shares and unit trusts. It means that dividends from unit trusts and shares purchased using SRS funds and deposited into an SRS account are tax-free.
How can I purchase ETFs directly?
Because you can’t just go to the store and buy a basket of ETFs, you’ll need to open a brokerage account first. However, before determining where to open your account, think about your objectives. Certain types of accounts are better suited to specific objectives.
- Taxable: These are “normal” accounts that do not offer any tax benefits. This makes them excellent for achieving goals before reaching the federal retirement age of 59 1/2. When you sell your investments, there are no restrictions or penalties, but you must be cautious of taxes. You’ll owe them whenever you make a profit on an investment or receive dividend payments.
- Traditional IRAs and Roth IRAs are tax-advantaged retirement accounts that allow your investments to grow tax-deferredor even tax-free in the case of Roth IRAs. As a result, they’re effective tools for saving for retirement. The IRS, however, imposes particular contribution limits and withdrawal criteria for IRAs as a result of these tax benefits. You can’t contribute more than $6,000 every year ($7,000 if you’re 50 or older), and you can’t access your IRA assets until you’re 59 1/2 without incurring a 10% penaltyplus taxes on any money that hasn’t been taxed previously.
- 529: A 529 account is a wonderful place to start if you want to use ETFs to save for college: Money invested in a 529 plan grows tax-free and isn’t taxed when it’s withdrawn if it’s utilized for approved school costs. 529 plans can now be utilized for pre-college expenses such as private school tuition and trade school fees. While funds maintained in 529 accounts cannot be withdrawn for non-education expenses without incurring a penalty, they can be transferred to another relative without penalty.
- Custodial: If you want a more limited means to save on behalf of a child, custodial brokerage accounts are a good option. You can invest and manage money on behalf of a child beneficiary using these investment accounts. Custodial accounts have no tax advantages, except that up to $2,000 of investment income is taxed at the child’s reduced rate, and money can be spent much more broadly than 529s. A 529 plan’s funds can be used for any purpose that benefits the child. However, once the minor reaches the age of majority (typically 18 to 25 years old, depending on where you live), they will have complete control over the account.
Can I buy US stocks using SRS?
Yes, you certainly can. You must first open an SRS Investment Account with an agency bank before submitting an SRS trade. Your Trading account with us must also be updated with the SRS Investment Scheme account number.
Is it possible to purchase REITs using SRS?
The Supplementary Retirement Scheme (SRS), which began in 2001, is a voluntary effort that is part of Singapore’s multi-pronged plan to assist citizens, permanent residents (PRs), and foreigners in starting to save for retirement.
We receive a dollar-for-dollar tax relief of up to $15,300 for citizens and PRs, and up to $35,700 for foreigners, as an incentive to contribute to our SRS accounts. It’s worth noting that we have an annual personal income tax relief ceiling of $80,000.
To begin contributing to our SRS account, we must first create an account with one of the three SRS operators in Singapore: DBS, OCBC, or UOB. After opening our SRS accounts, we are not bound to these operators and can invest in any available SRS investment with other financial organizations.
Also see: Supplementary Retirement Scheme – 4 Things To Know Before You Open An SRS Account
Once we reach the statutory retirement age of 62, we can begin making penalty-free withdrawals from our SRS account. The mandatory retirement age will rise to 63 on July 1, 2022, affecting anyone who start SRS accounts after that date. We shall be able to withdraw from the current statutory retirement age when we started our SRS account for individuals who already have an SRS account. Singapore’s statutory retirement age is expected to rise to 65 by 2030, according to the government. This is why it’s a good idea to register an SRS account now in order to “lock in” the existing withdrawal age.
Following that, we will have a 10-year opportunity to withdraw the entirety of our SRS funds at our first withdrawal. We must recognize that the SRS is a tax deferral mechanism, which means that our SRS withdrawals will be taxed. When we start withdrawing from SRS in the future, 50% of our withdrawals will be taxable. For example, if we remove $40,000 from our SRS account during the year, just $20,000 will be taxed. We should also mention that people who withdraw savings before the compulsory retirement age of 62 will face a 5% penalty as well as a 100% tax on their withdrawals.
Importance Of Investing Your SRS Contributions
We earn a nominal bank interest rate of 0.05 percent per year on funds we deposit into our SRS account (p.a.). This indicates that if we want to build our retirement savings, we must invest our SRS funds in order to generate higher returns.
This is in contrast to voluntarily contributing to our CPF Special Account (SA), which pays a minimum interest rate of 4% each year. However, we are unable to invest additional funds in our CPF SA.
In reality, as of December 2020, 27 percent of all SRS contributions, or $3.3 billion, is sitting idle in cash or Singapore Dollar fixed deposit. With that in mind, here are ten investments we can all make today with our SRS accounts to increase our retirement portfolios.
Also see: Why Increasing Your SRS Without Investing Doesn’t Help You Save Enough for Retirement
# 1 Stocks
With our SRS funds, we can invest in companies listed on the Singapore Exchange (SGX). We don’t have to invest through the banks that manage our SRS accounts; in most cases, we can continue to use our brokers.
This is especially useful for those of us who already invest a portion of our savings in stocks listed locally. This way, we’ll be able to keep making investments while also saving money on taxes.
# 2 REITs
We can invest in real estate investment trusts (REITs) that are listed in Singapore in the same way that we can in stocks. We can continue to use our present brokerage firms to make such purchases because REITs are purchased and sold similarly to stocks.
REITs tend to generate bigger dividends, and we should keep in mind that these distributions will be deposited into our SRS accounts rather than being paid out in cash.
# 3 ETFs
ETFs, or Exchange Traded Funds, follow regional or country indexes, stocks in a specific industry, REITs, bonds, commodities, and other financial instruments to mirror the composition of a wide index.
The SPDR STI ETF and the Nikko AM Singapore STI ETF are two ETFs in Singapore that track the country’s Straits Times Index (STI). Bond ETFs include the ABF Singapore Bond Fund, which invests in bonds issued by the Singapore government and government-linked organizations, and the Nikko AM SGD Investment Grade Corporate Bond ETF, which invests in corporate bonds issued by investment-grade issuers. The SGX also has a slew of additional ETFs, including three REIT ETFs, the SPDR Gold Shares, and a slew of others.
Is it possible to buy gold with SRS?
Gold, according to investment bankers and wealth managers, is a hedge against unfavorable economic conditions.
However, after seeing how the world has acted this year, I have my reservations about gold’s true value.
Gold shines only when the world is falling apart, and… Imagine the world’s worst economic crisis ever, with people questioning the worth of the dollar as well.
However, gold has few additional uses…. It’s nice during wars and depressions, but I don’t think accumulating gold is a good way to battle inflation….
What is the procedure for obtaining an SRS DBS?
- Use your User ID and PIN to access digibank Online.
- Select your Signature Account, Debiting Account, and Contribution Amount from the drop-down menus.
What can I do to help SRS OCBC?
Make a check payable to yourself and deposit it in any OCBC branch’s Quick Cheque Deposit box. On the back of the check, write:
If a check is received before 3.30 p.m. on a business day, the money will be credited to the SRS account around 4 p.m. the next business day if the check is good for payment.
Contributions must be made by December 30th of each year to be eligible for a tax deduction the following year.
Are ETFs suitable for novice investors?
Because of their many advantages, such as low expense ratios, ample liquidity, a wide range of investment options, diversification, and a low investment threshold, exchange traded funds (ETFs) are perfect for new investors. ETFs are also ideal vehicles for a variety of trading and investment strategies employed by beginner traders and investors because of these characteristics. The seven finest ETF trading methods for novices, in no particular order, are listed below.