Why Topping up SRS Is Better Than Topping Up CPF SA 往SRS充钱比往CPF SA充钱好
When it comes to reducing taxes while planning for retirement, contributing to your Supplementary Retirement Scheme (SRS) can often be more advantageous than topping up your CPF Special Account (SA). However, there are a few conditions to meet:
Your marginal tax rate is above 15%.
Interest rates in the economy are relatively high (above 3%).
You’re planning to retire between the ages of 40 and 50.
You have limited cash available for tax-saving purposes—say, less than SGD 15,300 per year.
If all these apply, here’s why SRS comes out ahead.
The Basics
Both CPF SA top-ups and SRS contributions qualify for tax relief. The tax savings you get are equal to the amount contributed × your marginal tax rate.
For example, if your marginal tax rate is 22% and you contribute SGD 15,300, you’ll save SGD 3,366 in taxes.
However, if your marginal tax rate is low (say, under 7%), it’s not worth the hassle. The tax savings won’t be significant, and your money will be tied up for decades. For this strategy to make sense, your marginal tax rate should be at least 15%.
Returns: SA vs. SRS
Money in your CPF SA earns a guaranteed, risk-free return of at least 4% annually without any effort. On the other hand, funds in your SRS account earn negligible default interest—you’ll need to actively invest them for returns.
So why choose SRS when interest rates are high? Because you can invest your SRS funds in Treasury bills (T-bills) or Singapore Savings Bonds (SSBs), which can offer similar risk-free returns of 3-4%. In this scenario, the risk-adjusted returns between SA and SRS become comparable.
Flexibility: SRS Wins
Here’s where SRS really shines: flexibility.
CPF SA Funds: Once contributed, your money is locked up until age 65, where it can only be withdrawn in small increments as part of your retirement payouts.
SRS Funds: While withdrawals are officially allowed only after retirement age (62 or 63), you can access the money earlier if needed by paying a 5% penalty plus your marginal tax rate for the year.
Let’s take an example:
Imagine a high-income crypto entrepreneur with a 22% marginal tax rate this year. He contributes SGD 15,300 to their SRS, saving SGD 3,366 in taxes. Next year, He loses his job and have zero income. If he withdraws the entire SRS amount, they pay a 5% penalty. Since his marginal tax rate is now 0%, his net tax savings are still SGD 2,601 after accounting for the penalty.
This flexibility makes SRS particularly useful for people planning to retire early (FIRE enthusiasts). High-income individuals can contribute to SRS during their peak earning years and withdraw the funds in their 40s or 50s when they have little to no income, bridging the gap until CPF payouts begin at age 65.
Limited Cash? Prioritize SRS
If your cash for tax-saving purposes is limited, SRS should be your first choice.
However, if you have more to spare—up to SGD 23,300 annually—the optimal strategy is to max out both:
SGD 15,300 to SRS.
SGD 8,000 to CPF SA.
For those in this fortunate position, it’s a no-brainer. But if funds are tight, SRS offers unmatched flexibility and strategic benefits, especially in a high-interest-rate environment.
(Disclaimer: This article was originally written in Chinese and translated into English by the almighty ChatGPT with some manual editing. In case of any discrepancies, the original Chinese version should be considered the preferred source. Below is the Chinese version)
往SRS充钱比往CPF SA充钱好。不过，这事有几个前提
1. 个税的边际税率大于15%
2. 大环境利率偏高（＞3%）
3. 打算在40-50岁时退休
4. 每年可以用来抵税的自由现金不多（少于15300新币）
这几个条件都满足的情况下，往SRS充钱比往SA充钱好
首先普及几个基本点: top up SA或者SRS都可以减税，能省的钱等于 充的钱×边际税率。如果收入较低，边际在7%以下，其实不必折腾。省的钱不多，但是钱被绑几十年，不值得。我认为边际税率至少15%，这事才值得搞
两者利率不同。钱进了SA，不用任何操作就有至少4%的无风险收益。而钱了SRS，默认利率近乎0，要收益得自己打理。那为啥说「大环境利率偏高」时放SRS合适呢？因为这时候放SRS然后买T-bill或者SSB，也同样有3-4%的无风险收益。换句话说，在同样的风险下，钱放哪里的收益都差不多
最重要的一点，是SA充值后，钱就被彻底绑定了，只能65岁作为退休金的一部分慢慢发出来。而SRS虽然原则上也要退休年龄（62/63）才能取出，但你实在要取也是可以提前取的，只要付5%的罚金+当年的边际税率
举个例子，一个币圈大佬今年的边际税率是22%，往SRS充钱15300新币，省税3366元。第二年失业了，收入为0，此时他从SRS把钱取出来，罚金是5%，那么一进一出仍然省了2601新币
这个道理也可以延伸到FIRE群体，年轻时收入高的时候往SRS存钱，40-50岁退休时零收入，再从SRS取钱，刚好可以部分填补65岁之前的收入真空。SRS是收入的蓄水池
当然，最后一个前提就是可供减税的自由现金不多，如果很多，那么15300+8000=23300直接都填满，是不二选择