Frustration Over PR Rejection

[smoulder]

Many people I know in the US that don't need the money have realised it's often better to claim early (despite the lower payments). Just invest the money received and earn a higher rate of return / more years to compound.

This seems to go against the conventional wisdom of trying to maximize the payments you receive.

The same might apply to CPF payouts too?

[NYY1]

Many people I know in the US that don't need the money have realised it's often better to claim early (despite the lower payments). Just invest the money received and earn a higher rate of return / more years to compound.

This seems to go against the conventional wisdom of trying to maximize the payments you receive.

The same might apply to CPF payouts too?

If you are talking about delaying CPF from 65 to 70, I think this will also change how much unused premium remains at any given age (refunded if you happen to pass away), and I'm not sure exactly when each case will be better.

If you are talking about how much to have in CPF Life in general, the same concept applies. You can put more money into the SA/RA and see what payouts / returns you will get. You can also leave the (excess) money outside of CPF Life and create your own annuity payment based on the returns of whatever assets you own.

Of course, there are other pros and cons (liability protection, inability to manage at an advanced age, one return is guaranteed while the other can only be estimated, etc).

[malcontent]

Many people I know in the US that don't need the money have realised it's often better to claim early (despite the lower payments). Just invest the money received and earn a higher rate of return / more years to compound.

This seems to go against the conventional wisdom of trying to maximize the payments you receive.

I think you would need to achieve over 8% returns annually for it to work out better, especially considering how social security is taxed versus other income sources, and factoring in inflation protection too. A guaranteed 8% is hard to beat.

Keep in mind too, everyone needs some level of safety in their retirement income, delaying expands that safety, allowing you to take greater risk with other investments. I intend to hold near 100% equity once we start drawing social security and CPF, because we’ll be able to afford the risk.

[NYY1]

Many people I know in the US that don't need the money have realised it's often better to claim early (despite the lower payments). Just invest the money received and earn a higher rate of return / more years to compound.

This seems to go against the conventional wisdom of trying to maximize the payments you receive.

Here is a writing that talks about why the 8% increase in benefits (for each year of waiting) is not equivalent to an 8% rate of return (read the Background and A Distraction section)*

The rest of the writing has a bunch of calculations and statements about when various scenarios are better (not saying I agree or disagree with any of these).

For the situation described above, I think it is easier to just take all of the payments you get every year (reduced if starting early), invest them, and see what they are worth when you die. Alternatively, take all of the payments you get starting at a later date, invest them, and see what they are worth when you die. For any age of death, you can see which one results in a higher balance.

https://www.financialplanningassociatio ... efits-OPEN

*I think another way to look at this is 1/0.7 = 1.43. If you delay payments for five years, you will get 43% more for each year that you are alive. However, you will never collect 43% more in total due the five payments you did not collect (you may also collect less if you die early).

[malcontent]

Thanks for the article. I am open to the idea and have a lot of respect for that publication. Definitely something to consider over the next 10 years.

Who knows where inflation or future tax rates will go, and who knows where we’ll retire… say we eventually retire in Bali, US social security is exempt from tax in Indonesia under tax treaty.

[NYY1]

No problem. I looked at the graphs a bit more and generally speaking I think they make sense compared to the work I've seen for investing the payments (indifference points and how those change with a higher or lower rate of return).

Regardless, I was thinking about the expected value vs. insurance/risk mitigation component a bit more. One can certainly try to maximize the expected value and financially speaking, they may end up better off.

At the same time, part of retirement planning is making sure you don't run out of money or need to dramatically alter your consumption. In that context, giving up some "value" to reduce downside scenarios may make sense. More or less, that's why people choose to insure various things, even though (most of) these are negative expected value propositions. CPF Life and US SS are essentially longevity insurance products (with US SS also having an inflation component). Ultimately, I guess it depends on each person's financial position and how big their buffer is.

I also think there is some argument for taking the payments early from a "utility" perspective. There may be a way to enjoy the funds more (travel, hobbies, other leisure) while you are relatively young. At some point, being alive and in good health are probably the primary concerns. Eventually, even a round of golf or a tennis match is going to be difficult to complete and enjoy. But this is a different argument and one that requires more subjective judgements (for CPF, there is no "early" option either).

[NYY1]

Many people I know in the US that don't need the money have realised it's often better to claim early (despite the lower payments). Just invest the money received and earn a higher rate of return / more years to compound.

This seems to go against the conventional wisdom of trying to maximize the payments you receive.

Here is a writing that talks about why the 8% increase in benefits (for each year of waiting) is not equivalent to an 8% rate of return (read the Background and A Distraction section)*

The rest of the writing has a bunch of calculations and statements about when various scenarios are better (not saying I agree or disagree with any of these).

For the situation described above, I think it is easier to just take all of the payments you get every year (reduced if starting early), invest them, and see what they are worth when you die. Alternatively, take all of the payments you get starting at a later date, invest them, and see what they are worth when you die. For any age of death, you can see which one results in a higher balance.

https://www.financialplanningassociatio ... efits-OPEN

*I think another way to look at this is 1/0.7 = 1.43. If you delay payments for five years, you will get 43% more for each year that you are alive. However, you will never collect 43% more in total due the five payments you did not collect (you may also collect less if you die early).

FYI, here is another article (same source) that compares ending wealth when claiming early vs. claiming late.

The article's conclusion is that waiting is generally better. However, there are two factors/assumptions worth noting.

#1. The maximum stock allocation they assume is 75%. If one really doesn't need the money and can push the stock weight closer to 100%, the results from claiming early will likely improve.

#2. The article uses a horizon of age 95 to evaluate the results. Conditional life expectancy at 62 is probably more like low to mid-80s (of course, it will vary by person).

If you look at Table 4 or Table 5, the 50th percentile wealth in the 75% stock allocation at age 85 is greater for claiming at 62 (than it is for claiming at 67 or 70). Again, presumably a 100% stock allocation will further favour claiming early. In general, I believe the numerical results are similar to the article referenced above; if one lives a very long time, waiting is better. In contrast, a better result is probably obtained (on average) for horizons that cover how long most people will live (although this comes with variance).

https://www.financialplanningassociatio ... value-OPEN

[malcontent]

This conversation seems to deserve its own thread, so I’ve created one here viewtopic.php?t=157330

[roslind.fong]

Dont retire , definitely not at 45 yrs old. If you intend to send your child overseas to further study , it will cost a lot !

[Bean123]

Hi bro. Fellow Vietnamese here. I came accross your post and I created an account just to reply to you.

I also received my rejection around October 2024 after 27 months waiting. I graduated from SMU and have been working as a data engineer for 8 years. Salary is around 110k year ( not high but not too low right) . For me the most painful thing is my wife is a true blue Singaporean. Could u believe it. In a many developed countries, marrying a local is a guarantee to PR and eventually citizenship.

We have no kid yet. I am dejected and have no clue what to do .

I would like to advise you to move to other places. Australia is a good choice. Please make the move while it is still easy. All the best to u and your family

[sundaymorningstaple]

@Bean123

Hi bro. Fellow Vietnamese here. I came accross your post and I created an account just to reply to you.

I also received my rejection around October 2024 after 27 months waiting. I graduated from SMU and have been working as a data engineer for 8 years. Salary is around 110k year ( not high but not too low right) . For me the most painful thing is my wife is a true blue Singaporean. Could u believe it. In a many developed countries, marrying a local is a guarantee to PR and eventually citizenship.

We have no kid yet. I am dejected and have no clue what to do .

I would like to advise you to move to other places. Australia is a good choice. Please make the move while it is still easy. All the best to u and your family

How long have you been married?

Moderator

[malcontent]

We have no kid yet. I am dejected and have no clue what to do .

Assuming you’ve been married at least 2 years, your spouse should march down to the ICA and request to speak to an officer. My wife has done this in at least 4 situations over the years when she believed she should have gotten a different outcome (1 was our daughter’s PR rejection, 2 were parent’s REP renewal rejections and 1 was when her own REP renewal took too long). In every case, she got the outcome she expected. In our daughter’s case, it took a couple of months and we had to formally write in to appeal.

[MOCHS]

It’s already clearly stated in the ROM document that foreigners married to Singaporeans are not automatically granted any long term visas.

If every Singaporean with a foreigner spouse can just “march down” to demand a favourable outcome, ICA is gonna be swamped.

Bean didn’t mention if he applied under PTS or family ties scheme. Maybe there’s a black mark in his record somewhere that he didn’t mention.

[Bean123]

[/quote]

Assuming you’ve been married at least 2 years, your spouse should march down to the ICA and request to speak to an officer. My wife has done this in at least 4 situations over the years when she believed she should have gotten a different outcome (1 was our daughter’s PR rejection, 2 were parent’s REP renewal rejections and 1 was when her own REP renewal took too long). In every case, she got the outcome she expected. In our daughter’s case, it took a couple of months and we had to formally write in to appeal.
[/quote]

Thanks. When is the last time ur wife march down to ICA and ask. We were married less than 1 year when i applied. I will apply again in a few months and if rejected i will ask my wife to march down.

[malcontent]

I know it sounds a little audacious to march down there, but as a PR/citizen sponsoring an immediate family member and getting rejected unexpectedly, speaking to an officer can help you understand what concerns or missing information they have.

In the case of our daughter’s PR rejection, the primary concern seemed to revolve around my wife’s business, which she was able to clear up for them and our appeal was successful. So, just keep in mind that it’s not always about the applicant, sometimes it can be about the sponsor too.