Financial spring cleaning in Year of the Snake

By Lorna Tan
Head, Financial Planning Literacy

If you’ve only got a minute:

• Occupying the 6th position in the Chinese zodiac, the snake is often associated with wisdom, flexibility, intelligence, and transformation. These are the same attributes that can help us to be on the lookout for fresh opportunities and ways to enhance our financial wellness.
• The start of the year is a good time to review your financial health and consider next steps. It is timely to assess if your emergency cash, insurance, investments, and retirement planning are on the right track, take steps to close money gaps and boost your resilience.
• It may seem early to plan for tax relief for the Year of Assessment 2026, but experience has taught me that it is better to take the necessary steps early in the year to avoid procrastinating and risk missing the window.

This article was first published in The Business Times.

The start of the year is a good time to review your financial health and consider next steps. It is timely to assess if your emergency cash, insurance, investments, and retirement planning are on the right track, take steps to close money gaps and boost your resilience.

With the Chinese lunar calendar’s Year of the Snake beginning on 29 January, we can take a leaf out of the characteristics of the snake. Occupying the 6th position in the Chinese zodiac, the snake is often associated with wisdom, flexibility, intelligence, and transformation. These are the same attributes that can help us to be on the lookout for fresh opportunities and ways to enhance our financial wellness.

Financial strategies

Let’s look at 4 financial strategies that are inspired by the key traits associated with the snake.

1. Wisdom – Practise patience and discipline

Across cultures, the snake symbolises wisdom and prudent financial decisions often require discipline. Adopt the “pay yourself first” approach to build a disciplined savings habit and learn to discern between needs and wants. Ensure you have an emergency cash fund of at least 3 to 6 months of expenses, and adequate insurance before investing in suitable products. Be cautious about spending impulsively, steer clear of risky investments, or investing without doing any due diligence.

Exercise patience and focus on long-term wealth building by adopting the dollar-cost averaging approach of investing regularly to ride out market volatility instead of timing the market. Long-term investing enables you to stay invested to ride out market downturns and volatility with more confidence. Do note that our financial journey is more akin to a marathon than a sprint, so slow and steady will win the race.

2. Intelligence – Plan strategically

Empower yourself with financial knowledge to make informed decisions. Enhance your financial literacy through reading credible content and attending seminars, research market insights and trends, and seek investment opportunities. Gaining an understanding of the wide range of solutions will go a long way in sharpening your analytical abilities. When you invest with a proper focus on fundamentals, you can sieve out market noise and have a greater peace of mind.

Leverage financial planning digital tools like the Plan tab in DBS’ digiBanking and consider consulting with a professional wealth planning manager for holistic financial advice.

3. Flexibility – Adapt to changes

Stay agile and be open to re-aligning your strategies in response to the changing economic conditions if the need arises. This includes always having some cash at hand to deploy during market downturns, having the ability to pivot your investment portfolio or adjusting your spending

Regularly assess your insurance needs, and always be on the lookout for short-, mid- and long-term opportunities to make your money work harder.

4. Transformation – Focus on growth and preservation

The snake sheds it skin as part of its transformation and renewal process. After all, the only constant in life is change, so be prepared to learn, unlearn and learn again. Similarly, it is timely to assess our financial health at the start of the year and make changes to enhance our situation.

Financial tips

Here are 4 financial tips to bring on the prosperous Year of the Snake, including suggestions on steps you can take early in the year to enjoy tax savings. It may seem early to plan for tax relief for the Year of Assessment 2026, but experience has taught me that it is better to take the necessary steps early in the year to avoid procrastinating and risk missing the window. Doing so in January also helps to get the compounding started, and you can reap the benefits over the long run.

1. Supplementary Retirement Scheme (SRS)

I have been contributing to SRS for several years and investing the funds fully. Having missed once due to procrastinating till the end of the year, I have decided to contribute to SRS at the start of each year rather than later, to ensure that I qualify for tax relief in the following Year of Assessment. Do note that a personal income tax relief cap of S$80,000 applies to the total amount of all tax reliefs claimed.

Introduced in 2001, the voluntary programme complements the Central Provident Fund (CPF) by providing wage earners with an avenue to build up nest eggs and get some tax relief at the same time. The annual contributions are capped at S$15,300 for Singaporeans and permanent residents (PRs) and S$35,700 for foreigners.

You can withdraw your savings – including investment gains – penalty-free on or after the statutory retirement age that prevailed when you made your first SRS contribution. Half of the sum will be subject to tax and you can spread your withdrawals over 10 years to take advantage of greater tax savings. With the statutory retirement age of 63 going up in phases to age 64 in 2026, and to age 65 in 2030, you may wish to consider joining SRS now, say with S$1, to lock in your penalty-free SRS withdrawal age.

Figures show that 19% SRS funds or about S$3.5 billion were sitting idle as at end of 2023, earning a paltry return of 0.05%. It is prudent to make them work harder for you by investing wisely in higher yielding investment assets and take advantage of the power of compounding over the long-term.

For risk-averse investors, you can consider investing in fixed deposits, Treasury Bills and/or the safe and flexible Singapore Savings Bonds. And as you gain more confidence in investing, you may invest in other products like unit trusts and stocks.

2. Optimise CPF monies

You can build your retirement savings by topping up your own CPF account and your loved ones’ CPF Special Account (SA) if they are below age 55 or Retirement Account (RA) if they are aged 55 and above. And enjoy tax relief of up to S$16,000 per calendar year. The recipients will benefit from the extra interest that will be paid in the respective accounts and there is peace of mind as they will have their own source of retirement payouts.

In the second half of this month, the SA will be closed for those aged 55 and above. For those who have yet to turn 55, for example, if they turn 55 in June 2025, the RA will be created (as per usual) and SA will be closed on their birthday. Monies from their SA will flow to their RA up to the Full Retirement Sum (FRS). Any excess will be channelled to the Ordinary Account (OA). It is timely to consider how you can work your CPF monies harder under CPF Investment Scheme (CPFIS) and potentially achieve returns higher than the OA’s annual return of 2.5%.

DBS offers a robust suite of multiple assets classes like equity, fixed income and multi assets, and exposure across developed, emerging, regional, and global/multi markets. They are available across different levels of risk appetite to suit your needs, to cater for growth and income generating objectives and to potentially achieve market returns higher than the OA’s 2.5%. Using CPF monies to invest in unit trusts under CPFIS comes with zero sales charge.

From January 2025, the Enhanced Retirement Sum has been further “enhanced” to 4 times of Basic Retirement Sum or S$426,000. This gives room for members like me who wish to top up their RA for higher payouts. On 1 January, I did a top-up to my RA to the prevailing Enhanced Retirement Sum of S$426,000 and will continue to do so each year, to enjoy higher monthly payouts when I start my CPF Life payouts at age 65. I also topped up S$4,000 to my CPF MediSave to the Basic Healthcare Sum of $75,500, to enjoy tax relief in Year of Assessment 2026.

Last year, I did a cash top-up to my parent’s RA to enjoy some tax relief and took advantage of the interest (up to at least 6%) and will continue to do so this year.

3. Reining in rising healthcare costs

The rising healthcare cost is a top concern for many Singaporeans who will be facing the double whammy of rising premiums from the private medical Integrated Shield Plans (IPs) and riders, and MediShield Life.

Following the end of the premium freeze on IP premiums at end-August 2024, nearly all IP insurers have raised their premiums for IPs and riders.

For those with IPs, here are some factors to consider: Do you continue with your plan or downgrade to a lower ward plan and/or rider? What savings would you enjoy? What benefits would you have to forgo? Only a review will allow us to properly weigh up the benefits and savings.

4. Housing loans

The lower interest rate environment has spurred more proactive financial decisions among homeowners. There has been much interest in fixed-rate home loan packages. At DBS Bank, they range from 2.60% to 2.90% p.a. for fixed rate terms of 1 to 3 years. This trend is particularly prominent among customers whose existing loans have exited the lock-in period and are currently on floating rates, which remain higher than fixed rates. Seeking stability in the current interest rate environment, many are opting for lower fixed-rate loans to secure predictable repayment terms and benefit from reduced monthly instalments.

In tandem with the US Federal Reserve’s series of rate cut announcements starting September 2024, there has been an increase in refinancing and repricing applications between September and November 2024. This marks a shift from the June to August 2024 period, during which many customers adopted a wait-and-see approach.

A home loan is a long-term commitment that requires careful planning. It is timely for homeowners to review their mortgage package. In fact, doing a regular review will help to ensure that it stays relevant to their financial needs and potentially enjoy some savings. Options to manage your home loan commitments include switching your loan to another package, or right-sizing your loan amount via repayments.

Before taking the plunge, check for any penalty as most home loan packages have a 2- to 3-year lock-in period. Also, evaluate if a refinancing package gives the flexibility to cater to changes, such as the intention to sell the property and rising interest rates. Another consideration is the switching costs of refinancing a mortgage or home loan to another bank such as legal fees and valuation cost. Some banks offer a subsidy to help customers defray some of these costs.

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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.