Working Paper: NBER ID: w19370
Authors: John B. Shoven; Sita Nataraj Slavov
Abstract: Social Security retirement benefits can be claimed at any age between 62 and 70, with delayed claiming resulting in larger monthly payments. In Shoven and Slavov (2013), we show that claiming later increases the present value of lifetime benefits for most individuals. However, this has not always been the case. During the late 1990s and early 2000s, a number of policy changes increased the gains from delay, particularly for couples. In addition, mortality improved and real interest rates fell substantially over this period, further increasing the attractiveness of delay. We perform simulations to examine the role of these factors in changing the gains from delay. We find that the gains from delay increased substantially after 2000, with changes in the interest rate playing the largest role in driving the increase. Using data from the Health and Retirement study, we show that individuals who turned 62 after 2000 are indeed more likely to delay than those who turned 62 before 2000. However, even in the younger cohort, most individuals still claim benefits soon after turning 62. Moreover, we find no evidence of a relationship between the probability of delay and the individual characteristics (e.g., gender, race, or health status) that affect the gains from delay.
Keywords: Social Security; Delayed Benefits; Retirement Planning
JEL Codes: D14; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Changes in interest rates (E43) | Gains from delaying social security benefits (H55) |
| Improvements in mortality (I14) | Gains from delaying social security benefits (H55) |
| Rule changes (Z28) | Gains from delaying social security benefits (H55) |
| Elimination of spousal claiming strategy (J12) | Gains from delaying social security benefits (H55) |
| Turning 62 after 2000 (J26) | Probability of delay in claiming benefits (C41) |
| Individual characteristics (gender, race, health status) (I14) | Probability of delay in claiming benefits (C41) |