Working Paper: NBER ID: w28919
Authors: Mark Duggan; Irena Dushi; Sookyo Jeong; Gina Li
Abstract: The delayed retirement credit (DRC) increases monthly OASI (Old Age and Survivors Insurance) benefits for primary beneficiaries who claim after their full retirement age (FRA). For many years, the DRC was set at 3.0 percent per year (0.25 percent monthly). The 1983 amendments to Social Security more than doubled this actuarial adjustment to 8.0 percent per year. These changes were phased in gradually, so that those born in 1924 or earlier retained a 3.0 percent DRC while those born in 1943 or later had an 8.0 percent DRC. In this paper, we use administrative data from the Social Security Administration (SSA) to estimate the effect of this policy change on individual claiming behavior. We focus on the first half of the DRC increase (from 3.0 to 5.5 percent) given changes in other SSA policies that coincided with the later increases. Our findings demonstrate that the increase in the DRC led to a significant increase in delayed claiming of social security benefits and strongly suggest that the effects were larger for those with higher lifetime incomes, who would have a greater financial incentive to delay given their longer life expectancies.
Keywords: Delayed Retirement Credit; Social Security; Claiming Behavior; Retirement Benefits
JEL Codes: H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Delayed Retirement Credit (DRC) increases (J26) | delayed claiming of social security benefits (H55) |
| DRC increases (O39) | probability of claiming at age 66 or later (J26) |
| higher lifetime incomes (J17) | responsiveness to DRC changes (O39) |
| earlier increases in the DRC (from 30% to 35%) (O55) | claiming behavior (D91) |
| subsequent increases in DRC (from 45% to 55%) (O00) | claiming behavior (D91) |
| DRC increases (O39) | rise in fraction of male retired workers claiming later (J26) |