Trends in Social Security Claiming

With lower Social Security replacement rates, vanishing traditional pensions, and longer lifespans, many people will need to work longer to ensure a secure retirement. Working longer directly increases current income; it avoids the actuarial reduction in Social Security benefits; it allows people to contribute more to their 401(k) plans; and it shortens the period of retirement. The good news is that people have begun to respond; the average retirement age has increased by about two years over the last 25 years. The challenge is to reconcile this increase in work effort with the benefit claiming data published by the Social Security Administration (SSA). These data, which are released annually, show, of all workers claiming benefits in a given year, the percentage who are age 62, 63, 64, etc. These data suggest that the proportion of older men who claim benefits as early as possible did not change at all over the 1985-2005 period and has only begun to decline in the last decade. This pattern is not consistent with the rise in the average retirement age. The problem is that when the size of the group turning age 62 is increasing, as it has over the last two decades, the data will show that 62-yearold claimants make up a larger portion of total new claimants in a given year even if a smaller percentage of 62-year-old workers claim immediately. To accurately follow claiming behavior over time, one must look at cohort data. Such data show, of the potential claimants turning 62 in a given year, the percentage who claim benefits as soon as possible. This brief presents cohort patterns based on unpublished SSA data on people eligible to claim retired-worker benefits by birth year. The discussion proceeds as follows. The first section describes the claim-year data published annually by SSA. The second section shows the change in the number of people turning 62 and discusses the impact of this “cohort effect” on claiming patterns. The third section presents claiming age by cohort. The final section concludes that the cohort (or birth-year) data, unlike the claim-year data, show that the share of people claiming Social Security retired worker benefits when they attain age 62 has been falling since the mid-1990s. This decline in people claiming early benefits is fully consistent with the increase in the average retirement age.