The AET is an appealing context for studying earnings adjustment for at least three reasons. First, bunching at the AET kink is easily visible on a graph, allowing credible documentation of behavioral responses. Second, the AET represents one of the few known kinks at which bunching occurs in the U.S.; indeed, our paper represents the first study to find robust evidence of bunching among the nonself-employed at any kink in the U.S. Third, the AET is important to policy-makers in its own right, as it is a significant factor that affects the earnings of the elderly in the U.S. The study is based on a panel of Social Security Administration microdata on 1 percent of the U.S. population from 1961 to 2006. We make three main contributions to understanding adjustment frictions. First, we document that earnings adjustment frictions exist in the U.S., by showing that in some contexts individuals do not adjust immediately to changes in AET. We focus particularly on cases in which a kink in the effective tax schedule disappears, either because individuals reach an age at which they are no longer subject to the ET, or because legislative changes remove the AET for some groups. We focus on the disappearance of kinks because in the absence of adjustment frictions, removal of a convex kink in the effective tax schedule should immediately lead to no bunching at the earnings level associated with the former kink; thus, any observed delay in reaching zero bunching should reflect adjustment frictions. We observe clear evidence of delays in some contexts, consistent with adjustment frictions. Nonetheless, across several contexts – including both anticipated and unanticipated changes in policy – the vast majority of individuals’ adjustment occurs within at most three years. Adjustment appears even faster in certain contexts. Second, we assess the mechanisms that underlie the patterns of adjustment we observe, in order to build a model consistent with these descriptive patterns. We assess the extent to which employers play a role in coordinating individual responses to the AET by offering jobs with earnings at the AET exempt amount. In our main period of study, we find little evidence that individuals not subject to the AET – those too young to claim benefits – bunch at the kink, suggesting that the primary responses to the AET are mediated by employees’ choices. We also find evidence that the individuals who respond to the