SRS investment options

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smoulder
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Re: SRS investment options

Post by smoulder » Thu, 26 Aug 2021 1:48 pm

malcontent wrote:
Thu, 26 Aug 2021 12:56 pm
And since this is an expat forum, take note that the maximum annual SRS contribution for EP holders is $35.7k (considering you don’t have CPF). Also note that an EP holder can withdraw their SRS in full after 10 years without penalty and you’ll only pay tax on half of the withdrawn amount. If you are no longer resident in Singapore at the time of the withdrawal you will pay 15% on half of the first $320k withdrawn (effectively 7.5%), or resident tax rates if it’s more. The tax savings is essentially the difference between your top tax rate and the future effective tax payable. If you have SPR/SC, even better, you could possibly avoid tax completely on withdrawal.
Yes good point. The upper limit for SRS contributions is higher for EP holders.

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Re: SRS investment options

Post by malcontent » Thu, 26 Aug 2021 2:08 pm

oceanphilic wrote:
Thu, 26 Aug 2021 10:27 am
Just curious, is there any online guide to performing the SRS > CDP > DTC transfer? Should we approach IBKR or CDP for advice? Just concerned that IBKR would log it under S27 instead of SPY (unless it doesn't really matter once it's in IBKR since there's international access and it's basically the same thing).
It’s basically two forms to fill out.

1. The SRS to CDP transfer is done when you withdraw from your SRS operator. This is called an in-kind transfer or withdrawal in the form of investments.

From Jul 2015, SRS members will be able to apply to their SRS operators to withdraw an SRS investment by transferring the investment out of their SRS accounts (e.g. into their personal Central Depository (CDP) account), without having to liquidate their SRS investments.

https://www.ifaq.gov.sg/mof/apps/fcd_fa ... x#FAQ_1605

2. Once the shares are in your CDP account, submit the form below to do a cross-border transfer to the US.

https://api2.sgx.com/sites/default/file ... logo_0.pdf
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Re: SRS investment options

Post by Wd40 » Thu, 26 Aug 2021 3:49 pm

malcontent wrote:
Thu, 26 Aug 2021 12:56 pm
And since this is an expat forum, take note that the maximum annual SRS contribution for EP holders is $35.7k (considering you don’t have CPF). Also note that an EP holder can withdraw their SRS in full after 10 years without penalty and you’ll only pay tax on half of the withdrawn amount. If you are no longer resident in Singapore at the time of the withdrawal you will pay 15% on half of the first $320k withdrawn (effectively 7.5%), or resident tax rates if it’s more. The tax savings is essentially the difference between your top tax rate and the future effective tax payable. If you have SPR/SC, even better, you could possibly avoid tax completely on withdrawal.
EP holders better stay away from SRS altogether unless you are in like 200k salary range. Also, you might end up having to pay tax in your home country at the point of withdrawal. The risk and uncertainty of locking in for so long in a country which is not your home, is not worth it.
Last edited by Wd40 on Thu, 26 Aug 2021 3:58 pm, edited 1 time in total.

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Re: SRS investment options

Post by smoulder » Thu, 26 Aug 2021 3:58 pm

Wd40 wrote:
Thu, 26 Aug 2021 3:49 pm
malcontent wrote:
Thu, 26 Aug 2021 12:56 pm
And since this is an expat forum, take note that the maximum annual SRS contribution for EP holders is $35.7k (considering you don’t have CPF). Also note that an EP holder can withdraw their SRS in full after 10 years without penalty and you’ll only pay tax on half of the withdrawn amount. If you are no longer resident in Singapore at the time of the withdrawal you will pay 15% on half of the first $320k withdrawn (effectively 7.5%), or resident tax rates if it’s more. The tax savings is essentially the difference between your top tax rate and the future effective tax payable. If you have SPR/SC, even better, you could possibly avoid tax completely on withdrawal.
EP holders better stay away from SRS altogether unless you are in like 200k salary range. Also, you might end up having to pay tax in your home country at the point of withdrawal. The risk and uncertainty of locking in for so long in a country which is not your home, is not worth it.

BTW, this is not really an expat forum anymore. Expats don't really have any forum for discussion in SG anymore as we don't see any pathway in SG.

This forum is for kind of people who are in the middle, neither locals nor foreigners.
Out of curiosity, would you end up paying tax on SRS withdrawals in India whenever you go back? How would it be different from taking back your non - SRS investments back?

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Re: SRS investment options

Post by Wd40 » Thu, 26 Aug 2021 4:02 pm

smoulder wrote:
Thu, 26 Aug 2021 3:58 pm
Wd40 wrote:
Thu, 26 Aug 2021 3:49 pm
malcontent wrote:
Thu, 26 Aug 2021 12:56 pm
And since this is an expat forum, take note that the maximum annual SRS contribution for EP holders is $35.7k (considering you don’t have CPF). Also note that an EP holder can withdraw their SRS in full after 10 years without penalty and you’ll only pay tax on half of the withdrawn amount. If you are no longer resident in Singapore at the time of the withdrawal you will pay 15% on half of the first $320k withdrawn (effectively 7.5%), or resident tax rates if it’s more. The tax savings is essentially the difference between your top tax rate and the future effective tax payable. If you have SPR/SC, even better, you could possibly avoid tax completely on withdrawal.
EP holders better stay away from SRS altogether unless you are in like 200k salary range. Also, you might end up having to pay tax in your home country at the point of withdrawal. The risk and uncertainty of locking in for so long in a country which is not your home, is not worth it.

BTW, this is not really an expat forum anymore. Expats don't really have any forum for discussion in SG anymore as we don't see any pathway in SG.

This forum is for kind of people who are in the middle, neither locals nor foreigners.
Out of curiosity, would you end up paying tax on SRS withdrawals in India whenever you go back? How would it be different from taking back your non - SRS investments back?
I would take my money back to India within 2 year of leaving SG, during the RNOR period, where you are not taxed on your foreign earnings.

When you are a tax resident in India you are liable to pay tax on your foreign generated income. So good luck explaining to Indian tax authorities that if was income you earned while you were in SG. Anyways on the capital gains you have to pay tax in India.

The whole hassle is not worth it.

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Re: SRS investment options

Post by smoulder » Thu, 26 Aug 2021 4:42 pm

Yes quite a hassle. They will try to tax you on the way in and try to stop you on the way out (the second scenario is what I'm going to face in a few years).

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Re: SRS investment options

Post by malcontent » Thu, 26 Aug 2021 6:07 pm

Wd40 wrote:
Thu, 26 Aug 2021 3:49 pm
EP holders better stay away from SRS altogether unless you are in like 200k salary range. Also, you might end up having to pay tax in your home country at the point of withdrawal. The risk and uncertainty of locking in for so long in a country which is not your home, is not worth it.
I used to think the same way and never touched SRS all these years, but starting last year my employer started forcing it on us, so either I accept SRS or forego the money. From a US tax perspective, it’s no different than depositing my compensation into an ordinary bank account. For that reason, there won’t be any US tax to pay at the end other than capital gains taxes if I sell S27… but I don’t plan to sell, in 2030 I will just pay the 7.5% tax to Singapore and transfer the shares to my US broker and keep holding them as part of my overall portfolio. In the future, if I’m able to keep my spouse outside of the US tax system, I can gift her the shares and then she can sell them tax free.

Since S27 is not a PFIC there are no complex tax or reporting issues for me. Last year I even got a refund on my US tax return for the 30% dividend withholding tax, so it all seems to be working better than I imagined.
It’s not what happens to you, but how you react to it that matters ~ Epictetus

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Re: SRS investment options

Post by Wd40 » Thu, 28 Oct 2021 10:07 pm

My friend prodded me couple of days back about SRS and made me dvelve a bit deeper into it. So for a foreigner who will be non resident and will withdraw after 10 years won't have a penalty but effective tax rate on the whole amount will be 7.5%.

I am just over the 120k taxable income this year due to a one off payment. So 5k of my salary will be taxed at 15% and below that at 11.5%.

I can contribute max 35.7k. So the blended tax rate on that amount is 12%. So by investing in SRS I make a tax arbitrage of 12-7.5= 4.5%.

4.5% of 35700 is 1428.

So question is how valuable is this amount? If you are in the 15 or 20% tax bracket you will need to correspondingly increase it and then evaluate whether it is worth it.

I am kind of confused now, but certainly not as negative as I was earlier.

There is another aspect to it. You defer the 12% tax for 10 years. 12% of 35700 is 4284. In 10 years you could double your money, and it won't be considered out of ordinary rate of return. So overall you can make about 5.5k by just choosing SRS.

Now it certainly looks attractive. Damn why didn't I think about it all these years?

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Re: SRS investment options

Post by malcontent » Thu, 28 Oct 2021 10:51 pm

I would suggest running the numbers again. I ran the numbers over the weekend and the 4.5% savings you mention is exactly correct (assuming the tax savings are invested and earn exactly the same return as your contributed funds in SRS).

But…… just a 0.5% lower return (from higher expenses) by investments housed in an SRS can eat up almost the entire 4.5% savings after that 0.5% is compounded over 10 years! Please check my math, but the 4.5% ended up being only 0.7% savings in the end!
It’s not what happens to you, but how you react to it that matters ~ Epictetus

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Re: SRS investment options

Post by Wd40 » Thu, 28 Oct 2021 11:07 pm

malcontent wrote:
Thu, 28 Oct 2021 10:51 pm
I would suggest running the numbers again. I ran the numbers over the weekend and the 4.5% savings you mention is exactly correct (assuming the tax savings are invested and earn exactly the same return as your contributed funds in SRS).

But…… just a 0.5% lower return (from higher expenses) by investments housed in an SRS can eat up almost the entire 4.5% savings after that 0.5% is compounded over 10 years! Please check my math, but the 4.5% ended up being only 0.7% savings in the end!
I would personally choose something like this Endowus dimension world equity fund which has 35bps expense ratio.

https://endowus.com/support/36000575255 ... quity-fund

There is also this thing about investment returns. Sometimes restrictions are good. I would choose this fund because it seems the best for SRS and I know I need to lock it in for 10 years, chances are I will stick with it.

If I didn't do SRS, I don't know, I might invest it in something else and may not eventually get even those returns.

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Re: SRS investment options

Post by malcontent » Thu, 28 Oct 2021 11:28 pm

Wd40 wrote:
Thu, 28 Oct 2021 11:07 pm
malcontent wrote:
Thu, 28 Oct 2021 10:51 pm
I would suggest running the numbers again. I ran the numbers over the weekend and the 4.5% savings you mention is exactly correct (assuming the tax savings are invested and earn exactly the same return as your contributed funds in SRS).

But…… just a 0.5% lower return (from higher expenses) by investments housed in an SRS can eat up almost the entire 4.5% savings after that 0.5% is compounded over 10 years! Please check my math, but the 4.5% ended up being only 0.7% savings in the end!
I would personally choose something like this Endowus dimension world equity fund which has 35bps expense ratio.

https://endowus.com/support/36000575255 ... quity-fund

There is also this thing about investment returns. Sometimes restrictions are good. I would choose this fund because it seems the best for SRS and I know I need to lock it in for 10 years, chances are I will stick with it.

If I didn't do SRS, I don't know, I might invest it in something else and may not eventually get even those returns.
I am different, I am too stubborn and stick with investments too much… even when I should let go. For example, at one time I invested in Japanese equities, and almost 15 years passed with almost nothing to show in the end, I finally got out, and although Japan has gone up some since then, it still lags the world, so I’ve been much better off without it.

My kids have asked me, when are you gonna sell? I tell them, hopefully never! That is the ideal holding period in my mind - as long as possible, the longer the better… compounding is your friend, like a snowball down the mountain. If I don’t need to touch it, I won’t.
It’s not what happens to you, but how you react to it that matters ~ Epictetus

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Re: SRS investment options

Post by Wd40 » Sun, 07 Aug 2022 8:25 pm

Coming back to this topic. This year I got a pay hike of 12% and slightly higher bonus, so that takes my gross pay for the year to about 143k, excluding the 7k relief for spouse, child and earned income, that makes about 16k of my income in the 15% tax bracket. I am considering putting this in SRS from this year onwards. Hopefully my pay continues to increase and I am able to stay here for few more years, the tax artibtrage if I hold it 10 years seems worth it.

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Re: SRS investment options

Post by malcontent » Mon, 08 Aug 2022 4:08 am

Wd40 wrote:
Sun, 07 Aug 2022 8:25 pm
Coming back to this topic. This year I got a pay hike of 12% and slightly higher bonus, so that takes my gross pay for the year to about 143k, excluding the 7k relief for spouse, child and earned income, that makes about 16k of my income in the 15% tax bracket. I am considering putting this in SRS from this year onwards. Hopefully my pay continues to increase and I am able to stay here for few more years, the tax artibtrage if I hold it 10 years seems worth it.
It depends. The tax arbitrage is a straightforward 7.5% (assuming the savings are invested and earn the same return) but to determine whether it is worth it, you’ve got to compare the investment costs inside versus outside of SRS.

Even an extra half percent higher cost in SRS over 10 years compounds to -5.1%, leaving you with just a 2.4% advantage.

However, if you hold an individual local stock outside of SRS and plan to hold it for 10 years anyway, then it makes sense to sell and repurchase in SRS.
It’s not what happens to you, but how you react to it that matters ~ Epictetus

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Re: SRS investment options

Post by PNGMK » Mon, 08 Aug 2022 11:14 am

WRT SRS with hindsight and the availability of SSB (Singapore Savings Bonds) I would have just put my SRS into SSB. I've put them into various Great Eastern Funds which perform as you'd expect - the best ones are the funds that pay out (like a bond or REIT) - the compounding becomes quite interesting over time - instead of having $15,00 annually to invest in Jan I am now around $25,000 with the bond payments that accrue through the year. I started in SRS the year I returned to Singapore (2005) and it was quite hard to get an account opened and do transactions back then.

IMO as SRS has an extremely long horizon (really a min of 10 years for EP, for a PR potentially 40 years if you started at ~25) it has to be a key part of your retirement planning if you earn even a moderate salary. Just the tax savings alone - even if you left the money in the 0.1% interest bearing SRS account become substantial over that time period (I estimate I've saved over 50k in tax alone).
I not lawyer/teacher/CPA.
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