Abstract
Recent changes legislated in the U.S. Social Security system have altered the economic incentives to work and retire. Some older workers will respond to these new incentives by retiring at different ages. This paper evaluates the signs and magnitudes of these responses. Four specific changes in the structure of Social Security benefits are examined: raising the normal retirement age, delaying the cost-of-living adjustment, lowering early retirement benefits, and increasing late retirement payments. Behavioral parameters are estimated using an ordered logit model of retirement ages; these are used to predict how retirement behavior might respond to each of the four reforms. Predicted changes in retirement ages will be too small to compensate retirees for reductions in benefit formulas. Thus, the Social Security's financial burden will be eased, but retirees' incomes will fall on average.
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