Social Security Claiming Research Articles

Delayed Social Security Claiming: Why Do So Few Participants Delay Claiming Past Age 65?

Delayed Social Security Claiming: Why Do So Few Participants Delay Claiming Past Age 65?

Two decades of Social Security claiming

Abstract Twenty years ago, the adjustment to monthly Social Security benefits for early or delayed claiming was, on average, roughly actuarially fair, although some subsets of individuals could gain from delay. Since then, delaying claiming has become much more attractive thanks to three factors: a more generous delayed retirement credit, improvements in mortality, and historically low real interest rates. In this article, I examine how these three factors influence optimal claiming behavior. I also discuss empirical patterns of claiming across individuals and over time, as well as explanations for these patterns. I argue that although many people appear to claim suboptimally early, this behavior may be changing as information spreads about the importance of the claiming decision. Finally, I discuss policy toward claiming and the impact that an increase in strategic claiming could have on Social Security's finances.

ACCOUNTING FOR SOCIAL SECURITY CLAIMING BEHAVIOR

AbstractWe study why Social Security benefit claiming is concentrated at two ages, 62 and the full retirement age, and provide three main findings. First, we show that claiming behavior can be well explained by a parsimonious life‐cycle model with fully rational agents. The two key mechanisms are (i) the strong unwillingness to hold annuities and (ii) the effects of the earnings test. Second, we show that current rules distort claiming and labor supply decisions, and eliminating these distortions results in large welfare gains. Finally, we show that claiming decisions can be used to sharpen the identification of important preference parameters.

What Motivates Social Security Claiming Age Intentions? Testing Behaviorally Informed Interventions Alongside Individual Differences

Choosing when to claim Social Security Administration (SSA) benefits is an important decision for older Americans’ financial health. While previous work has examined heterogeneity in claiming decisions, relatively little research has systematically tested the psychological factors that predict early or delayed SSA claiming or the effectiveness of theory-driven interventions meant to help with the claiming decision. A preregistered experiment and three replications examined the extent to which intended claiming age is a function of theory-driven interventions, individual difference measures, and relevant interactions between interventions and individual differences. The interventions that increased intended claiming age were those that suggest that delayed claiming may be the right choice (i.e., injunctive norm, information about the commonality of regret), those that highlight the financial benefits from delayed claiming (i.e., gains framing, focus on benefits to the future self), and those that guide preference construction through self-reflection (i.e., focus on right-tail longevity, reason generation). In addition, intertemporal discounting, subjective life expectancy, and perceived ownership of SSA benefits predicted intended claiming age. This research advances our understanding of which retirees will decide to claim earlier or later and offers practical insights for policy makers, financial planners, and consumer finance organizations.

Access to Health Insurance and Social Security Claiming: Evidence from Medicaid Expansion

Access to Health Insurance and Social Security Claiming: Evidence from Medicaid Expansion

Social Security Claiming Intentions: Psychological Ownership, Loss Aversion, and Information Displays

Social Security Claiming Intentions: Psychological Ownership, Loss Aversion, and Information Displays

Two Decades of Social Security Claiming

Two Decades of Social Security Claiming

Optimal Claiming of Social Security Benefits

Using a life-cycle framework, we compute the optimal age to claim Social Security benefits. If the ratio of a worker’s wealth to their primary insurance amount (PIA)—the monthly benefit payable at their full retirement age—exceeds a certain threshold, they should defer Social Security for at least a year or claim immediately. The optimal threshold depends on mortality assumptions and individual preferences, but is less sensitive to capital market assumptions. The threshold wealth to PIA ratio increases from 5.5 for men and 5.2 for women at age 62, to 11.1 for men and 10.4 for women at age 69. For example, a man with a PIA of $2,000 should delay past age 69 unless his wealth is less than $22,200, illustrating that all except those with low levels of wealth should delay claiming. Those with wealth below these levels should claim, because maintaining their consumption requires immediate Social Security payments.

Social Security reform with heterogeneous mortality

Using a heterogeneous agent, life-cycle model of Social Security claiming, labor supply and saving, we consider the implications of lifespan inequality for Social Security reform. Quantitative experiments show that welfare is maximized when baseline benefits are independent of lifetime earnings, the payroll tax cap is 50% larger than its current level, and claiming adjustments are reduced. The Social Security system that would maximize welfare in a “2050 demographics” scenario, characterized by longer lifespans and an increased education-mortality gradient, is similar to the one that would maximize welfare today.

Coping with Gendered Welfare Stigma: Exploring Everyday Accounts of Stigma and Resistance Strategies among Mothers Who Claim Social Security Benefits

Drawing upon findings from a qualitative project exploring welfare stigma in the lives of women in Merseyside, this article examines experiences of stigma and resistance strategies among the mothers interviewed. The article provides insights into how gendered stigma manifests in the lives of mothers reliant on social security benefits in the present era of continued welfare reform. The mothers’ experiences of stigma are argued to revolve around the devaluation of caring labour, the perception that benefits are undeserved and the notion of ‘bad motherhood’. Furthermore, the article contributes to knowledge about stigma resistance strategies, including acknowledging the value of care and rejecting blaming narratives. Nonetheless, it is argued that owing to the power and pervasiveness of structurally-imposed stigma, individualised resistance strategies are limited and mothers must also engage in everyday stigma management techniques.

The relationship of financial stress with the timing of the initial claim of U.S. Social Security retirement income

• Early claiming of U.S. Social Security retirement benefits reduces yearly benefits. • The higher is financial stress the less likely is an early benefit claim. • Increased earnings at age 60 tend to delay claiming retirement benefits. • High financial stress increases the likelihood of raised earnings delaying claiming. A large number of U.S. adults claim Social Security benefits at age 62, substantially earlier than the government specified full retirement age. One implication of an early claim is a reduction in the amount of future monthly benefits. The literature on the timing of Social Security claiming has developed numerous hypotheses to explain this behavior; however, previous empirical work has found few factors are statistically significant explanators of early benefit claims. We propose a new test concerning why some older adults claim Social Security benefits early; specifically, we test whether the level of an individual’s financial stress prior to the claiming decision is associated with a benefit claim at age 62. Our analysis finds that the greater the level of financial stress prior to claiming, the less likely is claiming, controlling for many aspects of an individual’s financial, social, and demographic situation. Comparing two individuals, we find that a person with a relatively high level of financial stress is 4 to 7 percentage points more likely to delay claiming Social Security benefits than a person with a low level of financial stress. We also find that earned income moderates the relationship between an individual’s financial stress and early claiming, where the same increase in financial stress is more likely to result in a delay in claiming for those with higher earnings than those with lower earnings.

Accounting for Social Security Claiming Behavior

Why do most individuals claim Social Security benefits before the full retirement age? Claiming benefits early results in a substantial reduction in pension income, yet many people claim as early as possible (age 62) or soon thereafter. We argue that by answering this question, we can make two additional contributions to the literature. First, early claiming is equivalent to low demand for Social Security annuity, thus it offers a unique context for studying the well-known annuity puzzle. Since participation in Social Security is nearly universal, the low demand for this annuity cannot be explained away by market failures. Second, we show that claiming decisions are closely linked to the subjective rate of time preferences and thus can provide a new angle for the identification of this parameter. We provide a quantitative analysis of claiming decisions using a rich structural life-cycle model that matches many important features of the data. We find that the claiming puzzle can be attributed to a combination of three factors: (i) the discrepancy between individuals' subjective valuation of Social Security annuity and its implicit price, (ii) strong bequest motives, (iii) pre-annuitized wealth. We show that if individuals were rewarded for delaying claiming not with additional annuity income but with equivalent (in present value terms) lump-sum payments, the fraction of early claimers would be significantly reduced.

United we stand, divided we sue: Collective access to court for labour and social security claims in Sweden

While Sweden has long enjoyed a solid reputation for protecting weaker parties through a comprehensive welfare state and a labour market governed by collective bargaining, its system for enforcing these rights has rested upon the public authorities and the social partners rather than on judicial proceedings. Against this background, this article examines the legal avenues for bringing collective actions and obtaining collective redress before courts in social security and labour law cases in Sweden. It finds that the relevant legislation does not explicitly provide for collective redress in either field. Within social security law, collective access to court is practically excluded, whereas in labour law, the current procedural framework can only with difficulty be construed as lending itself to measures of collective redress, and then only with some significant legal and practical limitations. While indicative of the general situation as regards collective redress in Sweden, whose legislation on group actions has been criticised for its toothlessness and has been put to little practical use, this also suggests that the tradition of collectivism in the Swedish social security and labour market systems still does not translate into collectivism in judicial redress.

DISPUTE RESOLUTION IN THE SOUTH AFRICAN SOCIAL SECURITY SYSTEM: THE NEED FOR MORE APPROPRIATE APPROACHES

The right to social security in South Africa is adjudicated and enforced mainly by means of litigation. This article examines litigation as a mechanism for the resolution of social security disputes in South Africa and its impact on both the right to have access to court and to social security. It argues that court-based adjudication may not be the most appropriate means of adjudicating social security claims. This is particularly as South Africa is a country where social security beneficiaries have limited knowledge of the laws and procedures, coupled with a lack of publicly-provided legal assistance/representation for social security cases. Dispute resolution mainly through the courts may contribute to the limitation of their right to seek redress and by implication, their right to have access to social security. Finally, the article proposes the investigation of more appropriate dispute-resolution processes. This is due to the failure of court-based adjudication to ensure access to justice (and to social security); constitutional requirements arising from the protection of the rights of access to justice and to social security; the Constitution’s focus on protecting persons who are particularly vulnerable and desperate; the availability of other (more appropriate) dispute-resolution mechanisms; and the relatively successful implementation of these mechanisms in the resolution of social security disputes in comparative jurisdictions.

The Value of Delayed Social Security Claiming for Higher-Earning Women

This study estimates the expected benefit from delayed Social Security claiming for higher-earning, healthier women who can expect to receive more future income payments than other Americans. The expected net present value of Social Security payments from delayed claiming for healthy women is $179,999, or more than twice the value of delayed claiming for a male of average health. The benefit from delayed claiming ranges from a low of $16,548 per year to $29,395 per year for healthy women. Even average health women gain at least $132,202 in Social Security wealth by waiting until age 70 to claim Social Security income benefits. Significant gains to women who delay claiming are robust to a 2% increase in real discount rates and to a 21% reduction in income that could occur if the Social Security trust fund depletes in 2026. The added benefits from reduced longevity and inflation risk suggest that the failure to delay claiming results in a significant loss in both retirement wealth and expected welfare.

Using vignettes to improve understanding of Social Security and annuities

AbstractEvidence shows that people have difficulty understanding complex aspects of retirement planning, which leads them to under-utilize annuities and claim Social Security benefits earlier than is optimal. To target this problem, we developed vignettes about the consequences of different annuitization and claiming decisions. We evaluated our vignettes using an experiment with a representative online panel of nearly 2,000 Americans. In our experiment, respondents were either assigned to a control group with no vignette, to a written vignette, or to a video vignette. They were then asked to give advice to hypothetical persons on annuitization or Social Security claiming, and were asked factual questions about these concepts. We found evidence that being exposed to vignettes led respondents to give better advice. For example, the gap between advised claim age for a relatively healthy person versus a relatively sick person was larger by nearly a year in the vignette treatments than in the control group. Furthermore, the vignettes increased financial literacy related to these concepts by 10–15 percentage points. Interestingly, the mode of communication did not have a significant impact – the video and written vignettes were equally effective.

Optimal Claiming of Social Security Benefits

Using a lifecycle framework with Epstein-Zin (1989) utility and a mixed-integer optimization approach, we compute the optimal age to claim Social Security benefits. Taking advantage of homogeneity, a sufficient statistic is the ratio of wealth to the primary insurance amount (PIA). If the investor's wealth to PIA ratio exceeds a certain threshold, individuals should defer Social Security for at least a year. The optimal threshold depends on mortality assumptions and an individual’s utility preferences, but is less sensitive to capital market assumptions. The threshold wealth to PIA ratio increases from 5.5 for men and 5.2 for women at age 62 to 11.1 for men and 10.4 for women at age 69. Below the threshold wealth to PIA ratio, individuals claim Social Security to raise consumption. Above this level, investors can afford to fund consumption out of wealth for at least one year, and then claim a higher benefit.

The Right to (Acquire?) Property: Social Security Rights before the ECtHR

The right to property belongs to the classical human rights canon in the European and North American constitutional traditions. It is a commonplace that Art. 1 of Protocol 1 to the ECHR (P1-1) safeguards only “existing possessions” under domestic law, without creating new pecuniary interests or the right to acquire property. This paper looks at this axiom in light of the recent jurisprudence of the European Court of Human Rights in the area of social security claims, which may suggest exceptions from this general rule. It is examined whether an expansive interpretation of P1-1 has blurred the dichotomy along the lines of an “existing possession versus a claim to acquire” in disputes on access to benefits. It will be explored how the Court applies the concepts of legitimate expectations and the rule of law to affirm the application of P1-1, where the existence of a pecuniary interest according to domestic law is disputed. While the Court’s reasoning has been criticized as excessively stretching the scope of P1-1, this contribution proposes that the objective of the right to property may support the Court’s reasoning.

Economic Uncertainties in Retirement: Risk Factors, Strategies, and Resilience

Even with forethought and planning, a lot can threaten economic wellbeing in the years ahead for older adults retiring at typical retirement ages. Although results for any individual cannot be predicted with certainty, some risks are quantifiable: for example, mortality/ longevity and disability risks are reasonably well-defined. Risk of dementia is not so well understood, and may be changing. Financial risk might be seen as manageable, but older adults relying on retirement income sources can be especially vulnerable to unprecedented shocks to the general economy. We consider four aspects of this dilemma. First, older adults retiring with outstanding debts may have difficulty weathering financial shocks. Our first presentation provides up-to-date information about trends in indebtedness at older ages, especially focusing on newly salient types of indebtedness: medical and student loan debt, and debt incurred to smooth finances in the recent recession. Stewardship of finances during retirement can be a challenging personal management undertaking. Our second presentation will consider how dementia can complicate this process. Protection against outliving one’s resources is more complex and costlier in the era of defined contribution retirement accounts. Our third presentation will discuss strategies to combine retirement assets, including Social Security claiming, to hedge longevity risk. Finally, needs for long-term services and supports may be met with either paid or informal (family) care, or both, but cannot be predicted with certainty. Our fourth presentation examines the long-term impacts on families due to the difficulty in insuring against this risk. Economics of Aging Interest Group Sponsored Symposium.

Social Security Reform with Heterogeneous Mortality

Using a heterogeneous-agent, life-cycle model of Social Security claiming, labor supply and saving, we consider the implications of lifespan inequality for Social Security reform. Quantitative experiments show that welfare is maximized when baseline benefits are independent of lifetime earnings, the payroll tax cap is kept roughly unchanged, and claiming adjustments are reduced. Eliminating the earnings test and the income taxation of Social Security benefits provides additional gains. The Social Security system that would maximize welfare in a 2050 demographics scenario, characterized by longer lifespans and an increased education-mortality gradient, is similar to the one that would maximize welfare today.