Build a Passive income Portfolio in Singapore as a passion project

How to Build a Passive Income Portfolio in Singapore

Introduction

Building a passive income portfolio in Singapore is a great way to achieve financial independence and ensure a steady cash flow even after retirement. With a well-structured strategy, you can earn consistent income without actively working for it. This guide will help you understand the best passive income options available and how to create a sustainable portfolio tailored to your financial goals.

1. Understanding Passive Income

Passive income refers to earnings that require minimal effort to maintain. Some of the most popular passive income sources in Singapore include:

Dividend stocks
Real Estate Investment Trusts (REITs)
Bonds and Fixed Deposits
Exchange-Traded Funds (ETFs)
Rental income from property investments
Peer-to-peer lending & alternative investments

To create a diversified passive income portfolio, it’s essential to mix different asset classes based on your risk appetite and financial objectives.

2. Dividend Investing in Singapore

Dividend investing is a popular strategy where investors purchase stocks that pay regular dividends. Here’s how to get started:

Best Dividend Stocks in Singapore

Some well-established dividend-paying stocks on the SGX include:

DBS Group (SGX: D05) – Consistent high dividends from banking.
Singapore Telecommunications (SGX: Z74) – Stable dividends from telecom services.
Keppel Corporation (SGX: BN4) – Reliable dividends from diversified businesses.
ST Engineering (SGX: S63) – Strong payouts from defense and engineering.

How to Choose Dividend Stocks

Look for Dividend Yield (%) – A higher yield means higher returns.
Check Dividend Payout Ratio – Ensure the company can sustain dividends.
Analyze Company’s Financial Health – Stable earnings and revenue growth.
Consider Dividend Growth History – Companies with consistent dividend increases are ideal.

3. Investing in REITs for Passive Income

Real Estate Investment Trusts (REITs) allow you to earn rental income without owning physical properties. Singapore REITs (S-REITs) distribute at least 90% of their income as dividends.

Best Singapore REITs for Passive Income

CapitaLand Integrated Commercial Trust (SGX: C38U) – Retail and office properties.
Mapletree Logistics Trust (SGX: M44U) – Industrial and warehouse properties.
Ascendas REIT (SGX: A17U) – Business parks and data centers.
Frasers Centrepoint Trust (SGX: J69U) – Suburban malls with strong foot traffic.

How to Pick the Right REITs

Check Dividend Yield & Distribution Per Unit (DPU)
Look at Occupancy Rate & Rental Growth
Analyze Gearing Ratio (Debt Levels)
Diversify across different property sectors (retail, commercial, industrial, healthcare, etc.)

4. Fixed Income Investments: Bonds & Fixed Deposits

If you prefer lower-risk passive income, bonds and fixed deposits provide steady interest payouts.

Singapore Savings Bonds (SSB)

Low-risk, government-backed bonds.
Interest rates increase the longer you hold.
Can withdraw anytime without penalties.

Corporate Bonds

Higher returns than government bonds.
Issued by companies like DBS, OCBC, and Singtel.
Consider credit ratings and risk levels.

Fixed Deposits

Guaranteed returns with minimal risk.
Best for short-term savings (6-24 months).
Compare interest rates from banks like DBS, UOB, and OCBC.

5. ETFs for Long-Term Passive Growth

Exchange-Traded Funds (ETFs) offer diversified exposure with minimal effort.

Best ETFs in Singapore

Nikko AM STI ETF (SGX: G3B) – Tracks the Straits Times Index (STI).
Lion-Phillip S-REIT ETF (SGX: CLR) – Focuses on Singapore REITs.
SPDR Gold Shares ETF (SGX: O87) – Invests in physical gold for stability.
Vanguard Total World Stock ETF (VT) – Global equity exposure.

ETFs provide a good mix of capital growth and dividend income, making them ideal for passive investors.

6. Alternative Passive Income Sources

For diversification, consider other passive income options:

Rental Income – Invest in residential or commercial properties.
Peer-to-Peer Lending – Platforms like Funding Societies offer fixed interest returns.
Digital Products & Online Businesses – E-books, courses, affiliate marketing.

7. Portfolio Allocation Strategy

Your portfolio allocation depends on your risk tolerance:

Conservative Investors (Low Risk, Stable Returns)

50% Bonds & Fixed Deposits
30% REITs
20% Dividend Stocks

Balanced Investors (Moderate Risk, Growth & Income)

40% Dividend Stocks
30% REITs
20% Bonds & Fixed Deposits
10% ETFs

Aggressive Investors (High Risk, High Growth)

50% Dividend Stocks
30% REITs
10% ETFs
10% Alternative Investments

Conclusion

Building a passive income portfolio in Singapore requires strategic planning and diversification. By investing in dividend stocks, REITs, bonds, and ETFs, you can create a stable and growing income stream over time. Start small, reinvest your earnings, and adjust your strategy as your financial goals evolve.

🚀 Start your passive income journey today and work towards financial freedom!

Annuity plans complementing CPF Life

Annuity plans are pivotal in ensuring a stable income stream during retirement, complementing Singapore's CPF Life scheme. These plans involve periodic contributions during one's working years, culminating in regular payouts upon retirement. Given the diverse annuity options available in Singapore, it's essential to understand their features and benefits to select one that aligns with individual retirement goals.

Key Features to Consider in Annuity Plans:

Premium Payment Terms: Options range from single premiums to regular contributions over specified periods (e.g., 5, 10, 15, or 20 years).
Income Payout Duration: Plans may offer fixed-term payouts (e.g., 10, 20, or 30 years) or lifetime income streams.
Disability Benefits: Additional support if the policyholder becomes unable to perform certain daily activities.
Unique Features: Some plans provide retrenchment benefits, escalating payouts to counter inflation, or special condition benefits.

Comparative Overview of Three Annuity Plans in Singapore:

Manulife RetireReady Plus (III):
- Premium Payment Options: Single premium or over 5, 10, 15, 20, or 25 years.
- Income Payout Duration: Choices include 5, 10, 15, 20 years, or lifetime payouts.
- Disability Benefits: Provides up to twice the Guaranteed Monthly Income (GMI) if the policyholder cannot perform 3 out of 6 activities of daily living.
- Unique Features: Offers a retrenchment benefit, providing a lump sum payout upon retrenchment to minimize disruptions to retirement goals.
- Payout Illustration: For a 35-year-old opting for a $1,000 GMI over a 20-year payout period, the annual premium is approximately $17,244.
Singlife Flexi Retirement II:
- Premium Payment Options: Single premium or over 5, 10, 15, 20, or 25 years.
- Income Payout Duration: Flexible periods ranging from 5 to 35 years.
- Disability Benefits: Doubles the GMI if the policyholder cannot perform 2 out of 6 activities of daily living.
- Unique Features: Offers competitive premiums with high guaranteed income and flexibility in income payout options.
- Payout Illustration: For a 35-year-old aiming for a $1,000 GMI over a 20-year payout period, the annual premium is approximately $13,184.
NTUC Income Gro Retire Flex Pro:
- Premium Payment Options: Single premium or over 5, 10, 15, 20, 25, 30, or 35 years.
- Income Payout Duration: Options include 10, 20 years, or lifetime payouts.
- Disability Benefits: Provides a premium waiver or 50% of the GMI upon disability.
- Unique Features: Includes a retrenchment benefit, offering a premium waiver for up to six months if the policyholder faces unemployment.
- Payout Illustration: For a 35-year-old seeking a $1,000 GMI over a 20-year payout period, the annual premium is approximately $15,792.

Conclusion:

Selecting the right annuity plan requires careful consideration of one's retirement objectives, financial capacity, and desired income stability. Manulife RetireReady Plus (III) stands out for its comprehensive disability benefits and retrenchment support. Singlife Flexi Retirement II offers flexibility with competitive premiums and high guaranteed income. NTUC Income Gro Retire Flex Pro provides a balance between premium affordability and essential benefits. Prospective policyholders should assess these features in line with their retirement aspirations to ensure financial security in their later years

Example of saving tax

Key Tax-Saving Strategies Based on example of a husband earning $140k and wife earning $60k per annum.

1️⃣ Personal Income Tax Planning

Without Reliefs:

Husband tax (on $140,000) = $10,950
Wife’s tax (on $60,000) = $1,950
Total family tax bill = $12,900

2️⃣ Claiming Child-Related Reliefs

Since you and your wife have 3 children, you can claim:

Qualifying Child Relief (QCR):
- $4,000 × 3 = $12,000 (either parent can claim)
Working Mother’s Child Relief (WMCR) for your wife:
- 1st child: 15% of her income = $9,000
- 2nd child: 20% = $12,000
- 3rd child: 25% = $15,000
- Total WMCR = $36,000
Total Reliefs Claimed (QCR + WMCR) = $48,000

📌 Impact:

Your wife’s taxable income drops from $60,000 to $12,000 → She pays $0 tax!
Your taxable income drops from $140,000 to $128,000 → You save $240 in tax.

3️⃣ CPF Top-Ups for More Tax Savings

If you top up $8,000 to your CPF SA/RA, you get $8,000 tax relief.
If you top up $8,000 to your wife’s CPF SA/RA, you get another $8,000 relief.
Total CPF Top-Up Tax Relief = $16,000.

📌 Impact:

Your taxable income drops from $128,000 to $112,000 → You save $1,840 in tax!

4️⃣ Supplementary Retirement Scheme (SRS) Contributions

If you contribute $15,300 to SRS, you get $15,300 tax relief.

📌 Impact:

Your taxable income drops from $112,000 to $96,700 → You save another $1,400+ in tax.

5️⃣ Parent Relief

If you support your parents (aged >55 & earning <$4,000), you can claim:
- $9,000 per parent (if living with you).
- $5,500 per parent (if not living with you).

📌 Impact:

If you claim $9,000 for one parent, your taxable income drops from $96,700 to $87,700 → You save another $880.

💰 Final Tax Savings Summary

Strategy	Tax Savings ($)
Child Relief (WMCR + QCR)	$2,190
CPF Top-Ups (Self & Spouse)	$1,840
SRS Contribution	$1,400
Parent Relief (One Parent)	$880
Total Savings	$6,310 per year

💡 Your new tax payable: $4,640 (vs. $10,950 before).

💡 Your wife’s new tax payable: $0 (vs. $1,950 before).

🔹 Total Family Tax Savings = $6,310 per year!
🔹 Over 8 years, that’s $50,480 saved! 🎉

Additional tax-savings strategies

Here are additional tax-saving strategies you can use to optimize further:

1️⃣ CPF Top-Ups for Tax Relief

Voluntary CPF Top-Ups (Up to $16,000 tax relief per year)

Self CPF Top-Up: Up to $8,000 tax relief if you voluntarily contribute to your CPF Special Account (SA) or Retirement Account (RA).
Family CPF Top-Up: Another $8,000 relief if you top up your spouse’s, parents’, or siblings’ CPF (if they earn below $4,000 annually).

📌 Extra Tax Savings:

If you contribute $16,000 annually, your taxable income drops further, saving you another $1,600 to $2,000 per year in taxes.
Over 8 years, this adds up to $12,800 - $16,000 in tax savings.

2️⃣ Supplementary Retirement Scheme (SRS) Contributions

You can contribute up to $15,300 per year (for Singaporeans/PRs) into an SRS account.
Contributions reduce your taxable income immediately.
Money can be withdrawn after age 62, and only 50% is taxable.

📌 Extra Tax Savings:

If you contribute $15,300 per year, you can save an extra $1,500+ per year in taxes.
Over 8 years, this is an additional $12,000+ in tax savings.

3️⃣ Claim All Family-Related Tax Reliefs

Spouse and Parent Reliefs

Spouse Relief: $2,000 (if spouse earns <$4,000).
Handicapped Spouse Relief: $5,500 (if applicable).
Parent Relief: $9,000 (if parents aged >55 & earn <$4,000).
Handicapped Parent Relief: $14,000 (if applicable).

📌 Extra Tax Savings:

If claiming Spouse + Parent Relief, you can reduce taxable income by $11,000 - $16,000, saving $1,100 - $1,600 per year.
Over 8 years, this adds up to $8,800 - $12,800 in tax savings.

4️⃣ Rental Property Tax Deductions

If you own a rental property, you can deduct expenses like:
✅ Mortgage interest
✅ Property tax
✅ Repairs & maintenance
✅ Agent fees

📌 Extra Tax Savings:

If your rental expenses are $10,000 per year, you avoid paying $1,000+ in taxes per year.
Over 8 years, that’s another $8,000+ in tax savings.

💰 Total Additional Tax Savings Over 8 Years

Strategy	Estimated Tax Savings Per Year	8-Year Savings
CPF Top-Ups	$1,600 - $2,000	$12,800 - $16,000
SRS Contributions	$1,500+	$12,000+
Family Reliefs (Spouse & Parents)	$1,100 - $1,600	$8,800 - $12,800
Rental Property Deductions	$1,000+	$8,000+
Total Additional Tax Savings	$5,200+	$41,600+

👉 Grand Total Tax Savings (Including Child Reliefs)
$60,600 + $41,600 = $102,200+ over 8 years! 🎉

An example of a family with 3 children if did not claim reliefs for 8 years with an annual income of $120k, how much will the family save in terms of taxes in Singapore

Let's break this down step by step:

Assumptions:

One parent earns $120,000 per year.
Did not claim any reliefs for the past 8 years.
The family has 3 children.
The mother is working (eligible for Working Mother’s Child Relief (WMCR)).
Reliefs are applied retrospectively for the last 8 years.

Taxable Income Without Reliefs:

Without claiming reliefs, taxable income = $120,000.

Based on Singapore’s personal income tax rates, the annual tax payable would be calculated as:

Chargeable Income ($)	Tax Rate	Tax Payable ($)
First 20,000	0%	0
Next 10,000	2%	200
Next 10,000	3.5%	350
Next 40,000	7%	2,800
Remaining 40,000	11.5%	4,600
Total Tax Payable		$7,950

So, without reliefs, annual tax = $7,950.

Applying Reliefs (Tax Savings)

1. Qualifying Child Relief (QCR)

Each child = $4,000 relief.
3 children = $12,000 relief.

2. Working Mother’s Child Relief (WMCR)

1st child: 15% of income = $18,000
2nd child: 20% of income = $24,000
3rd child: 25% of income = $30,000
Total WMCR = $72,000

3. Earned Income Relief

Assumed working parent gets $1,000.

Total Reliefs Applied

QCR: $12,000
WMCR: $72,000
Earned Income Relief: $1,000
Total Reliefs = $85,000

New Taxable Income

$120,000 – $85,000 = $35,000

Using tax rates:

Chargeable Income ($)	Tax Rate	Tax Payable ($)
First 20,000	0%	0
Next 10,000	2%	200
Remaining 5,000	3.5%	175
Total Tax Payable		$375

Total Tax Savings Per Year

Before reliefs: $7,950
After reliefs: $375
Annual tax savings = $7,575

Tax Savings Over 8 Years

$7,575 × 8 years = $60,600 in tax savings!

Tax reliefs to claim and up to how many years

Filing taxes are easy in Singapore. If you are a salaried worker. Most likely your employer will be included in the IRAS and you need not file for your income and bonuses. It is automatically included in your IRAS filing. However the reliefs are not that straight forward. I have friends who did not apply for the reliefs thinking that it is automatic as well. No they cannot be more wrong. You got to file for your reliefs. If you have children who are still schooling and are not working. Do file to get your reliefs. You will be savings thousands of dollars.

I have a friend who did not file for his child reliefs for 8 years when he was back in Singapore working. He have missed out for the past 8 years. I asked him to book an appointment with IRAS, IRAS did feedback him they can assist him to claim back 4 years. However the other years that he did not claim reliefs, they cannot do anything. I'm puzzled on this as i thought IRAS would have records up to whole life time for people who are working in Singapore. Nevertheless i told my friend to try writing to his MP for help. To see whether MP can help him out there. From my calculations he will be savings $10k - $20k tax as his income is also quite high. Hopefully his MP will be able to help him out. A dollar save is a dollar earn for this economy as cost of living has went up significantly for the past 5 years.