Got TOO MUCH money in SRS? How to pay less tax

Added: 2026-05-19

[00:00:00]When you and your money both work very hard, you will run into some rich man's problem, which is you have or you will have much more than 400k in your SRS account, which means that there is no way for you to not pay any tax upon withdrawal. So then the key question for you is okay, then how do I reduce the tax that I have to pay? Because I don't want to be paying back all of the tax that I have saved by contributing over the years. So in this SRS master level, this is what we're going to address. And one more thing that we're going to address is the one problem with SRS, which is the capital gains tax upon withdrawal or like let's say your investment gains. It will be taxed upon withdrawal, which is mainly what is stopping a lot of people from topping up to the SRS. So this video we're going to debunk that. Okay. So you'll see that it's really not difficult to have much more than 400K, much more than a pay no tax limit in SRS. So let's say maybe from age 40 to 60 for 20 years, you maxed out the SRS. So let's say you put in 15.3K for 20 years. Very doable.

[00:01:04]Okay. Times 20. In that case, you would already have about 307 611. And this is assuming it was growing inside at 0.05%.

[00:01:16]Meaning you never invested. It's just getting the SRS rate. Everything is just sitting there 307. But then what if you grow it at maybe like with a decent investment giving you about 4%. If at 4% then that would already bring you about 160k 170k more which is about 470k at 4%. Then what if it's at 6% average compounding at 6%.

[00:01:45]Then this would already be about 600k which is already double of what you initially or double of what you initially put in.

[00:01:56]Then let's say you have a few more spectacular years and everything is just a good opportunity. You caught all of the good opportunities maybe 800 900k or even over a million is very much possible. So here you can infer that okay then my investment gains will also be taxed. So you know that once you redraw they will tax 50% or they will tax half of whatever that you withdraw and that is regardless of whether that amount that you withdraw is made up of the initial principle that you put in or the investment gains that was inside the SRS. So there's no like discrimination or anything they will just tax everything together. Okay. Then in this case since there's no way to pay absolutely no tax on your investment gains then how you withdraw becomes extremely important. So how can we reduce that tax in a way that also makes sense for you? Okay, first thing is to be open-minded. So some tax is fine. So just don't be like close-minded say okay I must pay zero zero dollars tax. If that's already not possible let's just reduce it. Okay. So what you will see is probably even if you have like 800 900k inside it's possible to pay maybe less than 10k tax in total to redraw almost a million from your SRS. Okay. So this insane tax to income ratio how to achieve okay so you know the rules right for withdrawal once you start after your statutory retirement age number one you have 10 years to take out everything and whatever that you withdraw 50% or half will be subject to tax okay and then of course as SRS masters you would know that if you withdraw 40k per year then it will not be then you will not be taxed at all that year so let's say if you take out 40k because half is taxed Right? The half is not taxed. So you will only be taxed based on 20K. But if we look at the tax income tax brackets, 20K, no tax at all. So 0 plus 0 equals to zero. You don't pay any tax. So ideally, but then this only works for those who have 400K or less in the SRS.

[00:03:54]If you have more than 400k then this wouldn't make sense because if you go 40k every single year so let's say you have 800k inside and then if you go 40 40 every single year on the last year you will have 440k inside then how 440k based on the income tax bracket 220k is taxed right half so you will be taxed 24750 you will pay 24750 in tax all at once. So cannot this doesn't work. Okay. Then what we're going to do is instead of 40k we want to spread it out evenly. So you have 800k right and you have 10 years. Okay. Then divide by 10 instead of 40k we take out 80k per year. So every year we take out 80k. Then you know that if 80k again 50% tax we will pay tax based on 40k. 40k then you only pay $550 in tax to take out 80k from your SRS. So over 10 years that is only 5.5k 5,5 to take out 800k from your SRS.

[00:05:04]Okay, this one maybe you know you've heard of it. Space it out over 10 years.

[00:05:08]Duh. But then one thing that many many people miss is you started with 800K.

[00:05:15]But this 800K it doesn't pause. It doesn't stay as 800K. If it's still inside your SRS is still going to grow.

[00:05:23]So while you withdraw from your SRS, everything that's remaining inside the SRS is still being invested. So let's say if you did 80K, you did 80K every single year. If it still grows at 5% perom whatever inside still growing at 5% on the last year you end up with 359K still inside your SRS on the last year.

[00:05:45]Then if we divide by two because only 50% is taxed right you'll be taxed based on about almost 180k 180k that is another like 17k in tax.

[00:05:58]So you've been paying so nice only 550 every single year for nine years. then on the last year suddenly you pay 17k.

[00:06:05]So that doesn't make sense. Also you have to consider like buffer in some of the growth in your SRS balance. So maybe instead of 80k we can withdraw like 100k instead to ensure that okay while it grows I still evenly space it out. Okay.

[00:06:19]So let's say if we still use uh gross at 5% perom. So once we start we started with 800k so no change. Okay. In that case instead of redrawing 80k we redraw 103.6k.

[00:06:35]So 103.6k can you see 103.6k we redraw every single year for 10 years. In that case just nice we clear out everything.

[00:06:45]So while it is growing at 5% if I reserve 103.6k every year for 10 years then okay I will not be taxed like a huge sum in the end. So if you're familiar with like the financial calculations, this is based on the level withdrawal annuity calculation. Yeah. So the key thing is no matter what because it's still unpredictable, right? We simulated this based on 5%. You don't actually know how your investments will do. So the key thing is to always monitor it. If in the middle what suddenly big growth, okay, then maybe we start taking out a little bit more from the SRS. Yeah. So you see the key thing is to spread it out as evenly as possible so that you stay in the lowest possible tax bracket every single year in your 10 years of withdrawal. So let's say if we take out 103.6 then you'll be taxed 50%. So you'll be taxed based on 51.8k that is 1376 1376 per year in tax still. Okay. If we times 10 all together you would pay 1 3760 in tax over 10 years. But then remember that you redraw how much do you redraw?

[00:07:55]You redraw 103.6 times 10. So you actually take out 1.036 036 million from your SRS and you only pay 13K in tax. So the key thing is to not pay zero tax is to pay a very worthwhile amount of tax. So usually that's the case unless it's like a very rare case whereby it's really super exponential increase like a rare occurrence in your SRS investments. Otherwise, you will almost always see a net positive in tax savings. So, this is really thanks to it being only taxed 50% of what you withdraw compared to being taxed 100% and 50%, that's a difference [clears throat] of a few tax brackets.

[00:08:42]Even if, let's say, you don't save a lot in absolute terms when you contributed to the SRS. So maybe let's say when you did your contributions you were maybe in the 7% tax bracket then in that case if you contributed for let's use the same example 20 years then in that case your tax savings over the 20 years would be 21420 if I'm not wrong yeah 21420 so this is how much you saved by putting in for 20 years in a low tax bracket of only 7%.

[00:09:13]So this savings very conservative and then but then when you take out almost a million you only pay 13k. So that is still a net positive of 10k tax savings and you put in 300k you take out 1 million you get another 700k [laughter] because of your investments in the SRS.

[00:09:32]So basically the point here is if the only thing stopping you from putting into your SRS and contributing and investing it is because of the capital gains tax, you really don't have to worry about that too much. Okay, then our next richman problem. What if I don't even need the money in the SRS?

[00:09:49]It's pretty insignificant for my retirement. I don't need it. Or you just want to leave that money maybe for your family for your next of kin. In that case then what would be the most optimal way? Okay. So for the SRS, something to note is upon death, the first 400K is not taxed at all. So you pay zero tax on the first 400K. So this could be an option because you know that for the SRS there is no deadline to redraw means technically you could delay for as long as possible forever if you wanted to.

[00:10:22]There is no deadline. Okay. But then of course anything beyond [clears throat] 400k will still be taxed as per normal no still be taxed at 50%. Half of whatever that is in excess of 400k will still be taxed. In that case then it may not make sense if you have a lot more in the SRS say about 1 to 2 million then it may not make sense for you to delay all the way. Okay. So if we do a quick comparison if let's say we delay all the way we have say 2 million inside the SRS. If you delay all the way, then 400K will not be taxed. 1.6 million will be taxed.

[00:11:03]But since only half is taxed, so uh 800K no tax, the other 800K will be taxed. In that case, you pay one shot 153150.

[00:11:18]You pay 153K in tax.

[00:11:23]In that case you rather just space it out. So if let's say we space it out. So we use blue pen. In that case we have 2 million then we take 200k per year for 10 years 200k 200k. So every time you withdraw 200k you will pay tax based on 50%. Right? So same thing. So 100k you don't have to pay tax. The other 100k you pay tax. In that case your tax would be 5650 per year. So tax is 5650 per year. Over 10 years times 10 you pay 56500 in tax. So in that case you see that you might as well with redraw every single year rather than live it all the way for it to you know tax you one shot at like 153k. In that case if you redraw every single year you only pay 56k in tax. So it really depends on your SRS balance and also your financial circumstances when deciding okay which way really works better and is most optimal for you. Okay. So that's all for SRS master level. So the entire SRS series of four videos have all been posted and then do subscribe for more CPF and SRS strategy