Saturday, December 15, 2007

Immediate Gain from SRS Investment

From my previous posting about SRS, I mentioned that you can get an immediate profit from your SRS investment. Why do I say that?

First let me show you the tax savings if you put $11,475 into SRS:

If you are in the
a) 20% tax bracket - $2,295.00
b) 17% tax bracket - $1,950.75
c) 14% tax bracket - $1,606.50
d) 8.5% tax bracket - $975.38
e) 5.5% tax bracket - $631.13
f) 3.5% tax bracket - $401.63

Presuming a average tax payor is at 8.5% tax bracket, the tax savings will be ~$975 next year. If this person contribute to SRS and invest $11,475, he will pay $975 lesser in tax next year. Effectively, he only uses $10,500($11,475 - $975) for investment.

In another word, he had only used $10,500 in exchange for a asset of $11,475 in SRS investments.

Hence, his immediate gain from SRS investment = $975 / 10,500 = 9.3%
Your Immediate Investment gain for the following tax brackets are:
a) 20% tax bracket - 25% gain
b) 17% tax bracket - 20.5% gain
c) 14% tax bracket - 16.3% gain
d) 8.5% tax bracket - 9.3% gain
e) 5.5% tax bracket - 5.8% gain
f) 3.5% tax bracket - 3.6% gain

Guys! What are you waiting for!!! If you are currently savings for retirement, why not do it through the SRS way? You have until end of the year to open and contribute to SRS.

1 comment:

Anonymous said...

Before you jump into it, be warned.
This is NOT a tax saving plan. This is to incentivise you to save for retirement. If you have liquidity problem don't do it . You will run into a lot of financial difficulties if you look from that stand point.
See the bigger picture.