Social Security Retirement Benefits Research Articles

Time to retire: Why Americans claim benefits early & how to encourage delay

Because they are retiring earlier, living longer, and not saving enough for retirement, many Americans would benefit financially if they delayed claiming Social Security retirement benefits. However, almost half of Americans claim benefits as soon as possible. Responding to the Simpson– Bowles Commission’s 2010 recommendation that behavioral economics approaches be used to encourage delayed claiming, we analyzed this decision using query theory, which describes how the order in which people consider their options influences their choices. After confirming that people consider early claiming before and more often than they consider later claiming, we designed interventions intended to encourage later claiming. Changing how information was presented did not produce significant shifts, but asking people to focus on the future first significantly delayed preferred claiming ages. Policymakers can apply these insights.

Individual and work factors related to perceived work ability and labor force outcomes.

Perceived work ability refers to a worker's assessment of his or her ability to continue working in his or her job, given characteristics of the job along with his or her resources. Perceived work ability is a critical variable to study in the United States, given an aging workforce, trends to delay retirement, and U.S. policy considerations to delay the age at which full Social Security retirement benefits may be obtained. Based on the job demands-resources model, cognitive appraisal theory of stress, and push/pull factors related to retirement, we proposed and tested a conceptual model of antecedents and outcomes of perceived work ability using 3 independent samples of U.S. working adults. Data regarding workers' job characteristics were from self-report and Occupational Information Network measures. Results from relative importance analysis indicated that health and sense of control were consistently and most strongly related to work ability perceptions relative to other job demands and job and personal resources when perceived work ability was measured concurrently or 2 weeks later in samples with varying occupations. Job demands (along with health and sense of control) were most strongly related to work ability perceptions when perceived work ability was measured in a manufacturing worker sample 1.6 years later. Perceived work ability also predicted lagged labor force outcomes (absence, retirement, and disability leave) while controlling for other known predictors of each. Consistent indirect effects were observed from health status and sense of control to all 3 of these outcomes via perceived work ability.

Have We Finally Achieved Actuarial Fairness of Social Security Retirement Benefits and Will it Last?

This paper develops a framework to analyze the actuarial adjustments faced by American workers who claim Social Security benefits before or after their Full Retirement Age (FRA). We derive the conditions under which these adjustments are “actuarially fair” (or “neutral”) and develop measures to characterize the deviation from the fair form. Fair adjustment schedules are increasing at an increasing rate in take-up age and become flatter as longevity rises. We document that the actuarial fit has improved across generations. Our baseline 3% discount rate scenario estimates that the current schedule deviates from its fair form by less than 1% for average-mortality beneficiaries, compared to 5.1% and 4.0% for male and female beneficiaries in 1980, respectively. The improvement is largely due to the increases in the Delayed Retirement Credit. For men, gains in life expectancy combined with the increase in the FRA also contributed to the improved fit. We predict that the designated increase in the FRA to age 67 will have little effect on the actuarial fit. We investigate schedules reflecting (further) increases in the retirement ages, as recommended by the President’s 2010 Fiscal Commission, and propose alternatives. We also discuss results from the analysis of the adjustments to spousal and widow(er) benefits.

Involuntary Retirement, U.S. Social Security Program Participation and the Great Recession

Involuntary retirement covers economic and health related dislocations. Over 1992–2011, three-in-ten retirees in the Health and Retirement Study (HRS) report an involuntary retirement. Roughly half of these involuntary retirements are health-related. Following the Great Recession, involuntary retirement in the U.S. grew much faster than voluntary retirement. I find that while the population receiving Social Security retirement benefits grew 6% slower than average, the population receiving no public retirement or disability benefits grew 79% faster than average and the population reporting health-related involuntary retirement grew 270% faster than average. While incomes are found to have fallen for all retiree groups, those reporting health-related involuntary retirements are found to have retirement income declines of 38% and the lowest pre-retirement incomes of any measured group. These findings suggest patterns of vulnerability that have important implications for proposals seeking to reform the U.S. Social Security Program.

Why Some Workers Should Be Allowed a 'Buy-In' for Social Security: A Policy Suggestion to Reduce the Regressive Adjustments of the Windfall Elimination Provision

The Windfall Elimination Provision adjusts, through a reduction, the retirement income for workers who qualify for Social Security retirement benefits and have retirement benefits from employment outside of that system. While the WEP adjustment for workers with pensions from non-covered employment (which is common from employment by state and local governments that do not participate in the Social Security) has received some attention, there is little information for workers who have the same mix of earnings but who do not and will not receive a pension. This situation arises when workers receive their non-covered retirement benefits in a lump sum or in an Optional Retirement Plan. This paper details the WEP adjustment for these workers and suggests a policy that reduces the probability that total retirement income from the combined earnings will be less than Social Security retirement benefits as if all earnings were covered by Social Security.

What Impact Does Social Security Have on the Use of Public Assistance Programs Among the Elderly?

Low take-up by elderly Americans in most means-tested federal programs is a persistent and puzzling phenomenon. This paper seeks to measure the causal effect of the benefit levels on elderly enrollment in two public assistance programs – the Supplemental Nutrition Assistance Program (SNAP) and the Supplemental Security Income (SSI) program – by using the variation in SNAP and SSI eligibility and benefit levels introduced by Social Security retirement benefits. Our findings are three-fold. First, the low take-up among the elderly is not driven by changes in the composition of the eligible pool: individuals who become eligible as they age exhibit average take-up patterns that are similar to those who were eligible before reaching Social Security benefit claiming ages. Second, Social Security has a significant impact on the use of public assistance programs among the elderly, because the increase in income decreases the potential benefits available from public programs. Third, we estimate different behavioral responses to SNAP and SSI programs: a $100 increase in SSI benefits leads to a 4-6-percentage-point increase in the probability of taking up SSI, but we are unable to estimate consistent results on how benefits impact the take up for SNAP. Together with the fact that eligible individuals who begin receiving Social Security benefits continue to participate in SSI more often than they maintain SNAP enrollment, we posit that the different estimated behavioral responses could be due to individual preferences for cash over in-kind transfers.

Previous Migration Experience and Legal Immigration Status Among Intending Mexican Migrants to the United States

We examine the size and composition of flows of Mexican migrants intending to cross the border and enter the United States. We focus on two characteristics which relate to eligibility for Social Security retirement benefits: legal immigration status and prior US migration history. We compare estimates from before and after the onset of the Great Recession in 2007. We analyze data from the Survey of Migration at the Northern Border of Mexico (EMIF-Norte), an innovative survey of migration flows fielded in border cities and towns in Mexico. We find that the declining overall level of migration from Mexico to the US since 2007 is driven entirely by declines in the level of undocumented immigration. The size of the legal immigrant flow from Mexico has actually increased since the recession began. We find an overall shift away from migrants with no previous trips to the US, toward migrants with 11 or more previous trips. There was no significant shift in the distribution of previous US trips among undocumented migrants, but among work-authorized migrants, the representation of both first time migrants and those with more than 11 previous US trips grew. The increasing share and absolute number of work-authorized Mexican immigrants with 11 or more past trips to the US seems likely to affect the share of Mexican immigrants qualifying for Social Security retirement benefits in the future, and it may be valuable to continue to examine these trends.

Point of No Return: How Do Financial Resources Affect the Timing of Retirement After a Job Separation?

This project uses the Survey of Income and Program Participation to examine the decision to retire after job separation among the increasing number of older individuals who leave a job between 55 and 70, and how this decision varies by labor market conditions and the resources available to the unemployed. Among individuals whose jobless spells end in retirement, most do so within a year after separation. The availability of resources like Social Security retirement benefits, high net worth, and defined benefit pensions appear to encourage more rapid labor force exit and retirement, rather than supporting job seekers during a long search. Surprisingly, retirement is only modestly more likely when the unemployment rate is high, and a greater duration of unemployment insurance benefits has little effect on retirement timing. Poor health and work-limiting disabilities are also associated with more rapid labor force exit and retirement. These results suggest little tolerance for long job searches – regardless of labor market prospects – and indicate that those who can afford to retire will do so rather quickly.

Women's Receipt of Social Security Retirement Benefits: Expectations Compared to Elections

This research contributes knowledge regarding the options of early, normal, or delayed receipt of Social Security retirement benefits and research-based findings regarding women's expected and actual timing of election of Social Security retirement benefits. First, descriptive analyses of alternative retirement options, based on Social Security retirement benefit rules, are provided. Second, the 2000, 2002, 2004, and 2006 waves of Health and Retirement Study (HRS) data are used to analyze women's anticipated and actual election of Social Security retirement benefits. Third, based on these considerations, recommendations are made regarding Social Security retirement benefit receipt alternatives.

Women’s Timing of Receipt of Social Security Retirement Benefits

The 2000–2006 waves of Health and Retirement Study data were used to estimate the effects of human capital characteristics and income sources on women’s timing of receipt of Social Security retirement benefits. Using logistic regression, the likelihood of early election of benefits was increased by earnings regardless of marital status; and, for married women, by husband’s age being greater than wife’s, and by other income. For married women, education decreased the likelihood of electing early benefits. For unmarried women, IRA/annuity income reduced the likelihood of early receipt of benefits. Using multinomial logistic regression, the likelihood of combinations of expected and actual benefit receipt options were estimated. A greater percentage of married, compared to unmarried, women expected and elected early benefits.

Holding Out or Opting Out? Deciding between Retirement and Disability Applications in Recessions

Workers over age 55 with chronic health conditions must choose between applying for Social Security Disability Insurance (SSDI) benefits or continuing to work until their Social Security retirement benefits become available. Previous research has investigated the influence of macroeconomic conditions on disability application and, separately, on retirement claiming. This project uses data from the Survey of Income and Program Participation Gold Standard File to determine whether there is a relationship between national and state unemployment rates and disability applications, taking into account the current or future receipt of Social Security retirement benefits. First, reduced-form estimates indicate that retirement beneficiaries are more likely to apply for SSDI as unemployment increases – and, conversely, eligible individuals who have not yet claimed benefits are less likely to apply when unemployment rises. But after accounting for unobserved characteristics associated with both the decision to apply for disability insurance and Social Security benefits, individuals are no more likely to apply for disability benefits when unemployment is high. Second, we find that the probability of SSDI application among individuals age 55-61 is unrelated to macroeconomic conditions and unrelated to proximity to one’s 62nd birthday. These results suggest that, unlike prime-age adults, the decision among older individuals to apply for disability is based primarily on health, and not financial incentives.

Great Recession-Induced Early Claimers: Who are They? How Much Do They Lose?

During the Great Recession, more older workers have claimed Social Security retirement benefits early. This paper addresses two important policy questions: Who are these early claimers? How much retirement income have they lost as a result of claiming early? Using the Health and Retirement Study (HRS) we estimate a discrete-time hazard model that makes claiming Social Security benefits a function of age, personal characteristics, and the national unemployment rate. We project that high unemployment rates during the Great Recession led to a 5-percentage-point increase in the probability of claiming early relative to less severe recessions such as the 2001-2003 downturn, and this increase was nearly uniform across socioeconomic groups. Our estimates also suggest that while the Great Recession did impact the claiming decision, it did not cause a dramatic change in monthly benefits. Those individuals we label as “Great Recession Claimers” – whom we simulate were likely to claim their benefits early during the Great Recession but would not have claimed them in a milder downturn – filed for Social Security only 6 months earlier, on average, than they would have in a minor recession. This modest change in timing reduced their monthly Social Security benefit checks by $56, or 4.6 percent of average monthly benefits, and the Social Security replacement rate fell by 1.7 percentage points relative to a more typical recession. The benefit reduction resulted from the combined effect of the actuarial reduction for early claiming and the foregone opportunity to continue working and increase the wage base used for calculating benefits.

How to Improve Social Security Education: Retirement Plan Providers’ Perspectives

In-depth telephone interviews with defined contribution retirement plan providers, conducted by Mathew Greenwald & Associates in Summer 2011, reveal that most providers are working to educate their plan participants about Social Security and its role in ensuring financial security in retirement. Through website content, mailed materials, one-on-one meetings, and seminars, plan participants receive basic information on how Social Security works and how their benefit amount can vary based on their age at claiming. Most retirement plan providers are not able to give specific, individual advice on when a participant should claim their Social Security retirement benefits, but they consistently supply information to help inform this decision. Respondents express concern that trying to explain the solvency of the Social Security system to participants can be a challenge, and most believe the Social Security Administration could improve its communications to be more user-friendly for consumers. The experts and retirement plan providers interviewed in this study indicate a significant desire for greater collaboration with the Social Security Administration to develop effective communications and deliver useful and credible information to retirement plan participants and Americans as a whole. Some have specific suggestions for how the Social Security Administration can work more closely with defined contribution plan providers to help educate plan participants about the Social Security system and how Social Security benefits may serve as a critical component of their retirement income.

Improving the Social Security Statement

Uses data from the Health and Retirement Study to gauge near-retirees' ability to predict their Social Security retirement benefits both before and after the Social Security Statement began universal distribution to all near-retirees in 1995.

The Social Security Early Retirement Benefit as Safety Net

In this paper we used the Health and Retirement Study to examine the health and economic status of those who collect Social Security retirement benefits prior to the full retirement age. We used a propensity score reweighting method to estimate the fraction of early retirees who use early retirement benefits as a safety net against deteriorating health and who might be induced to apply for disability benefits (SSDI) or retire without income replacement if the generosity or availability of early retirement benefits were reduced. We find that while the majority of early retirees would likely not qualify for disability benefits, approximately one in five have health characteristics similar to SSDI beneficiaries, and thus might not be able to replace losses in benefit income with labor income.

Introduction

Introduction

Financial Hardship Before and after Social Security's Early Eligibility Age

Although poverty rates for Americans ages 65 and older have plunged over the past half century, many people continue to fall into poverty in their late fifties and early sixties. This study examines financial hardship rates in the years before qualifying for Social Security retirement benefits at age 62 and investigates how the availability of Social Security improves economic well-being at later ages. The analysis follows a sample of adults from the 1937-39 birth cohort for 14 years, tracking their employment, disability status, and income as they age from their early 50s until their late 60s. It measures the share of older adults who appear to have been forced into retirement by health or employment shocks and the apparent impact of involuntary retirement on low-income rates. The study also estimates models of the likelihood that older adults experience financial hardship before reaching Social Security's early eligibility age. The results show that the likelihood of experiencing financial hardship increases significantly as people approach Social Security's early eligibility age. The increase in hardship rates is concentrated among workers with limited education and health problems. For example, among those who did not complete high school, hardship rates increase from 23 percent at ages 52 to 54 to 31 percent at ages 60 to 61, a relative increase of 36 percent. Hardship rates decline after age 62, when most people qualify for Social Security retirement benefits. These findings highlight the fragility of the income support system for Americans in their fifties and early sixties.

Enhancing Social Security Benefits for Low Earners: Effects of Reducing Eligibility Requirements for Social Security Retirement Benefits

Under current law, eligibility for Social Security retirement benefits requires 40 quarters (roughly 10 years) of earnings in covered employment. While individuals with less than 40 quarters of employment may receive benefits based on the earnings record of an eligible spouse, a small number of unmarried individuals fail to qualify for retirement benefits due to a short earnings record. These non-qualified individuals often must depend on Supplemental Security Income (SSI) for support in retirement. However, SSI eligibility requirements limit earnings and asset accumulation, making it more difficult for beneficiaries to work or save. This paper explores the effects of eliminating the 40 quarters eligibility requirement. Doing so would allow retirement benefit eligibility for individuals with very short work histories and reduce dependency on SSI benefits. The effects of reducing the 40 quarters eligibility requirement are analyzed for the 1950 birth cohort using the Policy Simulation Group's GEMINI and PENSIM microsimulation models of the Social Security population and private pensions. Eliminating the 40 quarters eligibility requirement would increase benefits for approximately 5.8 percent of individuals. These benefit increases would be concentrated in the bottom three deciles of lifetime earnings, where 15 percent of individuals would receive increased benefits. Average benefit increases for affected individuals in the bottom three deciles of earnings would be around $2,400 per year. Benefit increases are concentrated among immigrants, whose shorter periods in the labor force increase the likelihood of not satisfying the current 40 quarters eligibility requirement. Due to the relatively small number of affected individuals, increases in total system costs would be modest. The 75-year actuarial deficit would increase from 1.70 percent of taxable payroll under current law to around 1.79 percent of payroll. While reducing or eliminating the 40 quarters eligibility requirement could increase benefit availability for very low lifetime earners, it would also increase benefits for individuals whose primary earnings were derived from employment not covered by Social Security. These individuals, mostly employees of state and local governments, could receive windfalls if other corrective actions were not taken. However, application of the existing WEP/GPO provisions to newly Social Security eligible state/local government employees could help correct for any imbalances in relative benefit generosity, although some modifications to WEP/GPO rules to maintain neutrality between covered and non-covered employees may be necessary. Moreover, increased Social Security retirement benefits could potentially remove individuals from SSI, which could then put at risk these individuals' eligibility for means-tested assistance programs such as Medicaid and Food Stamps. In most cases, however, increased Social Security benefits would supplement SSI rather than eliminate it.

Does the Rise in the Full Retirement Age Encourage Disability Benefits Applications? Evidence from the Health and Retirement Study

As the Social Security full retirement age rises, the relative generosity of Social Security retirement benefits compared to disability benefits is declining, raising the incentive for insured people to apply for disability benefits. After controlling for other differences in observable characteristics, such as life-time earnings, we find that an average four month increase in the FRA slightly increases the two-year DI application rate by 0.04-0.30 percentage points. The effect is greater among those with a work limiting health problem (0.22-0.89 percentage points).

Revisiting the 1983 Social Security Reforms, 25 Years Later

The authors examined changes in the ages at which people claim Social Security retirement benefits in response to the 1983 Social Security reforms, which gradually increase the full retirement age (FRA). Data came from the 1% sample of Social Security administrative data that contains longitudinal earnings and benefit claim information. The results show that the response to the gradual increase in the FRA has occurred not only among those who are close to the FRA but also among those who are close to the early retirement age. An increase in the full retirement age of 12 months is estimated to decrease the probability of claiming benefits at age 62 by about eight percentage points.