I have been contributing to my SRS for some time, to reduce my taxable income. I do not top up my SA. This is as SRS is more flexible than CPF SA. In the event that I need to make an early withdrawal, I can, with a 5% penalty. The withdrawal amount is also subjected to income tax. I reasoned that if I were forced to make an early withdrawal, I am likely not working by then and thus have no taxable income.
I was suddenly thinking, if I have more than $400k* in SRS (the maximum tax free withdrawal from SRS is $400k), do I still top up my SRS if I am still working then and need to reduce my income tax? The answer is a "Yes" for me. This is because only half of the withdrawal amount after the retirement age (62 for me) is taxable!
Even if one's SRS is $800k, the withdrawal per year is $80k. Half of that is taxable = $40k. According to income tax rates, the income tax is only $550.
This is a reminder post to myself.
*if I have 400k in SRS, I should be staring at FIRE in the face, based on the ratio of my SRS stocks to cash stocks currently :)
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