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The Role of Information for Retirement Behavior: Evidence Based on the Stepwise Introduction of the Social Security Statement

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  • Giovanni Mastrobuoni

Abstract

In 1995, the Social Security Administration started sending out the annual Social Security Statement. It contains information about the worker’s estimated benefits at the ages 62, 65, and 70. I use this unique natural experiment to analyze the retirement and claiming decision-making. First, I find that, despite the previous availability of information, the Statement has a significant impact on workers’ knowledge about their benefits. These findings are consistent with a model where workers need to gather costly information in order to improve their retirement decision. Second, I use this exogenous variation in knowledge to analyze the optimality of workers’ decisions. Several findings suggest that workers do not change their retirement behavior: i) Workers do not change their expected age of retirement after receiving the Statement; ii) monthly claiming patterns do not show any change after the introduction of the Social Security Statement; iii) workers do not become more sensitive to Social Security incentives after receiving the Statement. Either, workers are already behaving optimally, or the information contained in the Statement is not sufficient to improve their retirement behavior.

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File URL: http://crr.bc.edu/working-papers/the-role-of-information-for-retirement-behavior-evidence-based-on-the-stepwise-introduction-of-the-social-security-statement/
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Bibliographic Info

Paper provided by Center for Retirement Research in its series Working Papers, Center for Retirement Research at Boston College with number wp2009-23.

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Length: 47 pages
Date of creation: Oct 2009
Date of revision: Oct 2009
Handle: RePEc:crr:crrwps:wp2009-23

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  1. James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
  2. Alan B. Krueger & Bruce D. Meyer, 2002. "Labor Supply Effects of Social Insurance," NBER Working Papers 9014, National Bureau of Economic Research, Inc.
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  4. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(1), pages 205-224, January.
  5. Samwick, Andrew A., 1998. "Discount rate heterogeneity and social security reform," Journal of Development Economics, Elsevier, Elsevier, vol. 57(1), pages 117-146, October.
  6. Giovanni Mastrobuoni, 2006. "Labor Supply Effects of the Recent Social Security Benefit Cuts: Empirical Estimates Using Cohort Discontinuities," CeRP Working Papers 53, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  7. B. Douglas Bernheim, 1987. "Social Security Benefits: An Empirical Study of Expectations and Realizations," NBER Working Papers 2257, National Bureau of Economic Research, Inc.
  8. Giovanni Mastrobuoni, 2006. "The Social Security Earnings Test Removal: Money Saved or Money Spent by the Trust Fund?," Working Papers, Princeton University, Department of Economics, Center for Economic Policy Studies. 69, Princeton University, Department of Economics, Center for Economic Policy Studies..
  9. Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers, University of Michigan, Michigan Retirement Research Center wp108, University of Michigan, Michigan Retirement Research Center.
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  13. Liebman, Jeffrey B. & Luttmer, Erzo F.P. & Seif, David G., 2009. "Labor supply responses to marginal Social Security benefits: Evidence from discontinuities," Journal of Public Economics, Elsevier, Elsevier, vol. 93(11-12), pages 1208-1223, December.
  14. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, Econometric Society, vol. 65(4), pages 781-832, July.
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Cited by:
  1. Iñigo Iturbe-Ormaetxe Kortajarene, 2011. "Visibility of social security contributions and employment," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2011-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Jeffrey B. Liebman & Erzo F.P. Luttmer, 2011. "Would People Behave Differently If They Better Understood Social Security? Evidence From a Field Experiment," NBER Working Papers 17287, National Bureau of Economic Research, Inc.
  3. Luc Behaghel & David M. Blau, 2010. "Framing social security reform: Behavioral responses to changes in the full retirement age," PSE Working Papers halshs-00564950, HAL.
  4. Tibor Hanappi, 2012. "Retirement Behaviour in Austria: Incentive Effects on Old-Age Labor Supply," NRN working papers, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria 2012-13, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  5. repec:hal:wpaper:halshs-00564950 is not listed on IDEAS
  6. Fabian Duarte & Justine S. Hastings, 2012. "Fettered Consumers and Sophisticated Firms: Evidence from Mexico's Privatized Social Security Market," NBER Working Papers 18582, National Bureau of Economic Research, Inc.

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