The Decision to Delay Social Security Benefits: Theory and Evidence / John B. Shoven, Sita Nataraj Slavov.

Format:

Book

Author/Creator:

Shoven, John B.

Contributor:

National Bureau of Economic Research.

Slavov, Sita Nataraj.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17866.

NBER working paper series no. w17866

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

Social Security benefits may be commenced at any time between age 62 and age 70. As individuals who claim later can, on average, expect to receive benefits for a shorter period, an actuarial adjustment is made to the monthly benefit amount to reflect the age at which benefits are claimed. We investigate the actuarial fairness of this adjustment. Our simulations suggest that delaying is actuarially advantageous for a large subset of people, particularly for real interest rates of 3.5 percent or below. The gains from delaying are greater at lower interest rates, for married couples relative to singles, for single women relative to single men, and for two-earner couples relative to one-earner couples. In a two-earner couple, the gains from deferring the primary earner's benefit are greater than the gains from deferring the secondary earner's benefit. We then use panel data from the Health and Retirement Study to investigate whether individuals' actual claiming behavior appears to be influenced by the degree of actuarial advantage to delaying. We find no evidence of a consistent relationship between claiming behavior and factors that influence the actuarial advantage of delay, including gender and marital status, interest rates, subjective discount rates, or subjective assessments of life expectancy.

Notes:

Print version record

February 2012.