Back in 2024 I had a mini debate with a family member over how valuable it is to put savings in the SRS, given various tax brackets and its purported savings benefits. The SRS is effectively a tax deferment program; instead of paying 100% of taxes on (up to $15.3k) of your income today, you pay it upon withdrawal after retirement age, with the added bonus that only 50% of the withdrawn amount is subject to income tax (which, given Singapore's progressive tax model, works out to a larger cut in effective tax paid).

It sounds fine and dandy; however, there are a few major caveats:

• Your SRS funds become effectively illiquid; in the circumstances that you want to withdraw early, you have to pay a 5% fee, as well as 100% of the tax rate on the withdrawn sum (where, if you're still working, means you're paying the marginal tax rate of SRS after factoring in your income).
• After hitting retirement age, you must withdraw all SRS savings within the ensuing 10 years (for the purposes of 'breaking it up' across assessable-income years, that means you have to spread your SRS withdrawals out over 11 years to minimize the tax burden)
• SRS funds earn a baseline annual interest rate of 0.05% if left as cash in your SRS account, but certain platforms can be used where you can choose from a few SRS-vetted higher-risk portfolios (e.g. unleveraged all-equities funds with Roboadvisors like Endowus/Stashaway)

Endowus SRS investment options

This leads us to a few questions:

1. How much do I value the liquidity of $15,300 per year?
2. What is the effective opportunity cost of funds invested in SRS, versus funds invested in my personal savings strategies sans. SRS?

Question 1 is relatively straightforward to answer; it'll equate to a rough liquidity loss of $1,275 per month, locked up until retirement age. Question 2, however, is quite multifaceted, with a large variety of factors depending on market conditions, personal risk appetite, tax regimes, so on and so forth.

Baseline Investment Numbers

A long-time-horizon investment plan with a 100% equity portfolio on Endowus is projected to grow at 7.69% per year. For the sake of comparison, we shall also use this as our external investment strategy.

Projected annual returns from Endowus

Externally we invest in VWRA (FTSE All-World index) and SPY (S&P 500) - per these numbers from Curvo, both outperform 7.69%:

VWCE (also FTSE all-world) and SPY, net of fees per Curvo

To normalize risk and returns for a fair comparison, let's say we use 7.69% for both for-SRS and ex-SRS strategies. I like to model these as cash flows - for each year, calculate the amount of funds invested, taxes paid, etc., and simply model the net sum at the end. Importantly, Endowus charges a 0.4% per-annum management fee on top of underlying funds' expense ratios - this means that our effective interest rates are:

Tax is calculated using Singapore's progressive income tax brackets (YA2025). Since the $15,300 SRS deduction comes off the top of your income, the tax savings occur at your marginal rate (18% at $200k, rising to 22% as income grows), not the effective rate.

Investing Profile

The Calculations

Given the above numbers, we can plug them all into excel formulae to generate projected returns for our various profiles. You can download the spreadsheet here to play with the numbers yourself.

Given my calculations, the numbers are surprisingly close. Given a starting income of $200k, we can see that at almost no point in our life does SRS give us 'more money' than personally investing the funds — the SRS profile only overtakes no-SRS by a razor-thin margin of $1,485 in the very last year of withdrawal, on a ~$67M portfolio:

Liquidity comparison: SRS vs. no-SRS profiles

The general idea of SRS is that your 'accumulated liquidity' improves due to the tax deferment - you sacrifice early-age liquidity for lower taxes on the same funds in future. You would expect the SRS profile to 'overtake' the no-SRS profile during the withdrawal period as the tax savings come home. It technically does — but the gap peaks at -$1.7M at age 62 and only barely crosses zero at the very end:

Liquidity difference over time (SRS minus no-SRS)

Why is the system broken?

There are a few frictions that cause the majority of differences between our numbers:

Brokerage fees

The Endowus 0.4% annual fee adds significant compounded erosion. The SRS tax arbitrage is real — you save at your 18-22% marginal rate during accumulation and pay back at only ~3.76% effective during withdrawal (thanks to the 50% concession + progressive rates on a smaller base). This should be worth ~$400k over a lifetime; however, the 0.4% annual fee compounds to erode almost exactly that amount, leaving SRS essentially breakeven. If we simply made the Endowus fee 0% (i.e. if there was some way to get equivalent outside-SRS rate of return to inside-SRS), SRS would win by ~$400k:

Endowus fee impact on SRS returns

Liquidity difference if Endowus had no fees. I can see an argument for SRS here, though still not an outright obvious choice given the tradeoffs.

10-Year withdrawal cap

The 10-year cap on SRS withdrawals forces a compressed withdrawal schedule. By age 62, our SRS sum has compounded into $2,094,824.37; an even withdrawal strategy over 11 years requires -$268,388 per year (after taking into account compounding). After the 50% taxable amount haircut, this amounts to a 'taxable income' of ~$134k, or ~3.76% effective tax on the full withdrawal. This is actually quite favorable — the real issue is that a longer withdrawal period would let the remaining SRS balance compound further while keeping each withdrawal's taxable portion in lower brackets.

• Note that SRS also introduces significant risk in the form of tax regimes. If Singapore tweaks the tax brackets in future (as we already have seen in 2024), we would be subjecting our SRS deposits to whatever rates the government sets in future.

Possible confounding factors

These calculations are all based on the present state of affairs for a Singapore citizen. There are several factors that may change our calculations:

Conclusion: Should I invest in SRS?

If you're savvy enough to invest yourself, with the profile above it's hard to see a compelling argument for investing in SRS. The tax arbitrage is real (save at 18-22% marginal, pay back at ~3.76% effective), but the fee erosion from SRS platforms almost exactly cancels it out, leaving you essentially breakeven against self-directed investment on platforms like IBKR. Going with SRS + Roboadvisor, we see:

1. Significantly reduced choices for investment funds
2. Annual percentage-based fee erosion of capital (0.3% to 0.4%)
3. Significant liquidity lockup
4. Risk in tax regime

And in return, we maybe see a tiny amount of net-cash-growth in the last few years of our SRS withdrawal period.

• With a 0.4% fee platform: roughly breakeven (the tax arbitrage and the fee erosion almost exactly cancel each other out)
• With a lower-fee platform: SRS wins
• With a higher-fee platform (>0.66%): SRS loses
• The liquidity lockup is a significant unmodeled cost - are we willing to lock up such a significant amount of funds until retirement?

There are only a few scenarios in which I'd recommend going with SRS:

• You plan to use the same investment platform within and without SRS (i.e. you're already paying the same fees on both side)
• You like the idea of locking liquidity up as a form of forced-retirement savings
• You think the future income tax regime is going to be lighter than today's tax rates
• You want your money going to {platform, e.g. Endowus} instead of the Government
• You think SRS benefits improve in future - since there is a hard cap on rate-of-SRS-investment, we cannot retroactively decide to invest $500k into SRS if suddenly it becomes highly profitable to use SRS.

Side Note - Why do my numbers contradict common wisdom??

When I first got these results I was quite surprised, as general sentiment online has been largely in favor of investing in SRS; a recent post last month, for example, recommends 'if you are a HENRY (>$100k per year) it is always optimal to start contributing to SRS and investing it as early as possible'.

However, I downloaded his spreadsheet and noted a few factors:

1. In his own words, it doesn't make sense to invest in SRS at all ages - there's a curve of an 'ideal age' to start investing in SRS. My projections are specifically for 30 year olds. The author finds that it starts becoming profitable at age 34, for $200k income and 7.69% interest rate.
2. No platform fee erosion (assumes 7% both in and outside of SRS) - this explains the main difference in recommendations

Having taken these factors into account, I decided I won't be following the SRS scheme, given the significant downsides and negligible upside.