I’m still in my late-20s but here is why I’m already saving for retirement

It is possible to grow your money to serve more than just survival purposes.

Matthias Ang | Sponsored | December 10, 2020, 06:00 PM

It’s not a stretch to say that most people in their late-20s have a number of saving goals that they are currently working towards.

In my case, this includes a house, as well as my own retirement, which should ideally consist of having funds for more than just medical bills.

After all, retirement should not consist of merely survival on a day-to-day basis, rotating in and out of clinics and hospitals for the treatment of various body functions that might be breaking down by then.

I’m sure many of us would like to spend our retirement in a more meaningful manner, such as a trip around the world or simply spending quality time with our family and friends.

And coupled with the fact that Covid-19 has put our holiday plans on hold, now is perhaps the best time to plan and save for the long-term.

Saving for retirement using the SRS

Given that the CPF savings are usually meant to provide for “survival” retirement needs such as housing and medical fees, this is where I find the Supplementary Retirement Scheme (SRS) comes in handy as an alternate source of saving for retirement pleasures.

Alright, some of you might be wondering at this point, what is the SRS about, given that it is also a government-launched retirement scheme.

Here’s the quick lowdown:

  • It’s entirely voluntary,
  • Contributions to the SRS are eligible for dollar-for-dollar tax relief (I.e. For every S$1 you contribute to your SRS, your taxable income reduces by S$1),
  • Only 50 per cent of the withdrawals are taxable after retirement,

    • As such, if you spread your SRS withdrawals over a period of 10 years, you can minimise or even omit the payable tax.

      You can grow the money in your SRS account through various instruments such as unit trusts, stocks and insurance.

  • There is no minimum amount for the contributions that can be made to the SRS, although there is a maximum annual cap of S$15,300 for Singaporeans and PRs.

    • This means you can start small first if you don't have much in your mid-20s -- no one is asking you to set aside a fortune for your SRS.

All of these means that the SRS is extremely useful as a means of not just growing money, but even saving on taxes!

And given that my own plan for retirement consists of an epic trip of a lifetime, this is a scheme that goes quite some way in helping to achieve that goal, with every bit of money placed inside.

Future serious health issues aside, I think we are all entitled to enjoying a quality retirement doing what we love the most.

Even so, it’s best to still do some sums before you begin putting money into the SRS account as a premature withdrawal before the statutory retirement age attracts penalties.

Alright so maybe I’ll put in a little bit of cash into my SRS. What next?

Say, for instance, you just decide to put in S$1,000 for the heck of it (if you are unsure about how to do so, here’s a guide).

At this point, it is important to know that the interest rate on uninvested cash in the SRS account is currently 0.05 per cent per annum -- an almost negligible amount that will not keep pace with inflation, which means you should not rely on the interest rate of the SRS as a means of growing your money for your retirement plans.

Fortunately, there are quite a number of investment avenues and platforms to channel your money into.

You can start from as little as S$50 per month or a lump sum of S$100

One such platform is MoneyOwl, which allows you to start investing your SRS funds online from as little as S$50 per month or a lump sum of S$100.

A joint venture between NTUC Enterprise and Providend Pte Ltd., it also has one of the lowest advisory fees in the market, from 0.5 per cent to 0.6 per cent per annum for SRS investments.

Users can also choose five different portfolios, depending on their risk-appetite.

These portfolios are not adjusted based on forecasts of any kind or assumption of superior individual skill.

Instead, the portfolios to strategic asset allocation are adjusted every quarter so as to keep the volatility of the portfolio within your risk appetite.

As such, this means that you do not have to worry about market timings or picking specific stocks to minimise the risk to your portfolio as a result of events that can cause market losses, such as an announcement that a country is returning to lockdown as a result of rising Covid-19 cases.

Get up to S$200 in shopping vouchers when you invest your SRS with MoneyOwl

And from now until Dec. 31, 2020, you will also receive shopping vouchers known as eCapitaVouchers, which can be used at a variety of malls such as ION, Bugis Junction, and Jewel Changi, among others, depending on the amount of SRS money you invest with MoneyOwl.

Here’s how it works:

  • A S$50 voucher for a fresh fund of S$1,000 to S$10,000 invested, or
  • A S$100 voucher for a fresh fund of S$10,001 to S$50,000, or
  • A S$200 for a fresh fund of S$50,001 and above.

Fuller terms and conditions of the promotion can be viewed here.

You can also find out more at MoneyOwl’s website.

This sponsored article made the author fantasise about life after retirement.

Top image via Unsplash