The effect of Social Security rules on the age people choose to retire can be critical in evaluating proposed changes to those rules. This research derives a theory of retirement that views retirement as a special type of labor supply decision. This decision is driven by wealth and substitution effects on labor supply, interacting with a fixed cost of working that makes low hours of work unattractive. The theory is tractable analytically, and therefore well-suited for analyzing proposals that affect Social Security. This research examines how retirement age varies with generosity of Social Security benefits. A ten-percent reduction in the value of benefits would lead individuals to postpone retirement by between one-tenth and one-half a year. Individuals who are relatively buffered from the change—because they are wealthier or because they are younger and therefore can more easily increase saving to offset the cut in benefits— will have smaller changes in their retirement ages. Authors’ Acknowledgements This work was supported by a grant from the Social Security Administration through the Michigan Retirement Research Center (Grant #10-P-98358-5). The opinions and conclusions are solely those of the authors and should not be considered as representing the opinions or policy of the Social Security Administration or any agency of the Federal Government. The authors gratefully acknowledge this support.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number
wp054.
References listed on IDEAS 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.:
Did you know? Each page is provided with a technical contact, in case something is not right with the supplied information. See under "publisher info".