I started to top up my Supplementary Retirement Scheme (SRS) account since last week.
Even though the amounts I topped out are small, they help me to slowly but steadily conquer the full annual contribution limit of $15,300.
I have contributed $403.10 to SRS so far using "free" passive income from Savings Bonds interest and IPPT award monies.
I plan to continue contributing to SRS using savings and "free money" from dividends this and next month.
My target to complete the contribution cap of $15,300 by end Mar 2024.
It is only February and why do I start contribution so early in the year instead of waiting till end of the year?
Let me share 5 reasons why.
1. Investment Goal and Opportunity
As the long-term investment goal for my SRS investment portfolio is to accumulate and go heavy on OCBC bank, ironically the bank of my SRS account, I always target to add more OCBC banks shares before April of every year using SRS funds. This is because OCBC pays dividends in May and August annually and the earliest XD to qualify for May's dividend is early May.
The earlier I load up my SRS account with funds, the better I will be able to capitalise on investment opportunities from occassional dips in OCBC share price.
As of now, I only have around $2k in my SRS account. I will have to top up at least $5k soon in order to have a chance to nibble more OCBC shares.
As I have an investment plan, my funds in SRS seldom lie idle and will be deployed to good use soon after they are injected.
2. Avoid Procrastination
We all have a tendency to put things off till the last minute. Topping up SRS early removes the temptation to delay and ensure that I complete this financial assignment early to qualify for tax relief as well as building up my retirement readiness.
I may also not have the spare funds during year-end for SRS contributions as my funds could have been deployed in other cash-related investments or paying off credit card bills incurred from holidays or furniture purchases.
3. Psychological Advantage
Contributing to SRS early in the year becomes a positive habit and sets a morale boosting tone for the year.
This helps me to establish a consistent saving habit to achieve financial freedom and ultimately retirement. It becomes less of a burden and more of a natural action.
By building up my SRS investment portfolio early of the year allows me to move on and focus on building my SGX cash portfolio next. I will get a better sense of accomplishment and feel more motivated psychologically towards achieving my financial goals.
4. Reduce Spending Temptation
By contributing to SRS early, I will reduce the temptation to spend my money on travelling or unnecessary things in the early part of the year.
The commitment to allocate huge portion of my savings towards SRS funding instills strong discipline in my financial budgeting objectives and forces me to prioritise long-term financial goals over short-term spending impulses.
5. Compounding growth
Compounding is the 8th wonder of the world. As my funds become available in SRS early in the year, they have more time to stay invested and potentially generate returns or reap dividends earlier.
These dividends then get recycled back into my SRS to become investment capital, potentially earning additional returns in subsequent periods. Such continuous periods of compounding will accelerate the growth of my SRS portfolio allowing me to cruise towards the journey of financial freedom more effectively.
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