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The Effects of Subjective Survival on Retirement and Social Security Claiming

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Author Info
Michael D. Hurd (RAND)
James P. Smith (RAND)
Julie M. Zissimopoulos (RAND)

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Abstract

This research examines the relationship between mortality risk and retirement, and mortality risk and the propensity to take early and reduced Social Security benefits. The main theory for understanding saving behavior is the life-cycle model (LCH). The LCH, however, can be extended to find the optimal retirement age, and can be used to make predictions about the desire to annuitize or equivalently, the desire to delay claiming Social Security benefits. According to the LCH, individuals who expect to be exceptionally long-lived will retire at a later age than individuals who expect to die early because they will need greater wealth to finance more years of retirement. According to almost any model of intertemporal maximization, those who expect to be long lived will see the increase in Social Security benefits that result from retiring at 65 rather than at 62 as being financially advantageous and will, therefore, delay application for benefits until the age of 65. In principle the decision to retire and the decision to take early and reduced benefits are related decisions but not necessarily the same decision. Therefore this study examines both decisions.

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Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp021.

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Length: 20 pages
Date of creation: May 2002
Date of revision:
Handle: RePEc:mrr:papers:wp021

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-91, April. [Downloadable!] (restricted)
    Other versions:
  2. Brown, Jeffrey R., 2001. "Private pensions, mortality risk, and the decision to annuitize," Journal of Public Economics, Elsevier, vol. 82(1), pages 29-62, October. [Downloadable!] (restricted)
    Other versions:
  3. Michael Hurd & Daniel McFadden & Angela Merrill, 1999. "Predictors of Mortality Among the Elderly," NBER Working Papers 7440, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Coile, Courtney & Diamond, Peter & Gruber, Jonathan & Jousten, Alain, 2002. "Delays in claiming social security benefits," Journal of Public Economics, Elsevier, vol. 84(3), pages 357-385, June. [Downloadable!] (restricted)
    Other versions:
  5. Michael D. Hurd & Kathleen McGarry, 1997. "The Predictive Validity of Subjective Probabilities of Survival," NBER Working Papers 6193, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Jeffrey R. Brown & Mark J. Warshawsky, 2001. "Longevity-Insured Retirement Distributions from Pension Plans: Market and Regulatory Issues," NBER Working Papers 8064, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Steven A. Sass & Wei Sun & Anthony Webb, 2008. "When Should Married Men Claim Social Security Benefits?," Issues in Brief ib2008-8-4, Center for Retirement Research, revised Mar 2008. [Downloadable!]
  2. Todd Elder, 2007. "Subjective Survival Probabilities in the Health and Retirement Study: Systematic Biases and Predictive Validity," Working Papers wp159, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  3. Friedrich Breyer & Stefan Hupfeld, 2007. "On the Fairness of Early Retirement Provisions," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Pierre-Carl Michaud & Frederic Vermeulen, 2006. "A Collective Labor Supply Model: Identification and Estimation in the Presence of Externalities by Means of Panel Data," Working Papers 406, RAND Corporation Publications Department. [Downloadable!]
  5. Mark E. Votruba, 2003. "Social Security and Retirees' Decision to Work," Working Papers 853, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  6. Delavande, Adeline, 2005. "Pill, Patch or Shot? Subjective Expectations and Birth Control Choice," CEPR Discussion Papers 4856, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Donna Dosman & Wiktor Adamowicz, 2006. "Combining Stated and Revealed Preference Data to Construct an Empirical Examination of Intrahousehold Bargaining," Review of Economics of the Household, Springer, vol. 4(1), pages 15-34, 03. [Downloadable!] (restricted)
  8. Owen O'Donnell & Federica Teppa & Eddy van Doorslaer, 2008. "Can subjective survival expectations explain retirement behaviour?," DNB Working Papers 188, Netherlands Central Bank, Research Department. [Downloadable!]
  9. Thierry Debrand & Nicolas Sirven, 2009. "Quelles sont les motivations des départs à la retraite en Europe : situation personnelle, familiale, professionnelle, ou rôle de la protection sociale ?," Working Papers DT26, IRDES institut for research and information in health economics, revised Jun 2009. [Downloadable!]
  10. David E. Bloom & David Canning & Michael Moore & Younghwan Song, 2006. "The Effect of Subjective Survival Probabilities on Retirement and Wealth in the United States," PGDA Working Papers 1706, Program on the Global Demography of Aging. [Downloadable!]
    Other versions:
  11. Michael Hurd & Julie Zissimopoulos, 2003. "Saving for Retirement: Wage Growth and Unexpected Events," Working Papers wp045, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  12. Adeline Delavande & Hans-Peter Kohler, 2009. "Subjective expectations in the context of HIV/AIDS in Malawi," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 20(31), pages 817-875, June. [Downloadable!]
  13. John Laitner, 2003. "Labor Supply Responses to Social Security," Working Papers wp050, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  14. Adeline Delavande & Michael Perry & Robert Willis, 2006. "Probabilistic Thinking and Early Social Security Claiming," Working Papers wp129, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  15. Jeff Dominitz & Angela Hung & Arthur vanSoest, 2007. "Future Beneficiary Expectations of the Returns to Delayed Social Security Benefit Claiming and Choice Behavior," Working Papers wp164, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  16. Mathias Kifmann, 2008. "The Design of Pension Pay Out Options when the Health Status during Retirement is Uncertain," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  17. Thierry Debrand & Nicolas Sirven, 2009. "What are the Motivations of Pathways to Retirement in Europe: Individual, Familial, Professional Situation or Social Protection Systems?," Working Papers DT28, IRDES institut for research and information in health economics, revised Oct 2009. [Downloadable!]
  18. Kristin J. Kleinjans & Jinkook Lee, 2006. "The link between individual expectations and savings: Do nursing home expectations matter?," Economics Working Papers 2006-05, School of Economics and Management, University of Aarhus. [Downloadable!]
  19. Giovanni Mastrobuoni, 2006. "The Social Security Earnings Test Removal: Money Saved or Money Spent by the Trust Fund?," Working Papers 892, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  20. Didier Blanchet & Thierry Debrand, 2008. "The sooner, the better? Analyzing preferences for early retirement in European countries," Working Papers DT13, IRDES institut for research and information in health economics, revised Jul 2008. [Downloadable!]
  21. Adeline Delavande & Robert Willis, 2007. "Managing the Risk of Life," Working Papers wp167, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
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