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The Impact of Misperceptions about Social Security on Saving and Well-being

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  • Susann Rohwedder

    (RAND)

  • Arthur van Soest

    (RAND)

Abstract

Earlier research suggests that many people in their fifties and early sixties are not well informed about their Social Security benefit entitlements in old age. This paper investigates the effect of deviations between individuals’ anticipated and realized Social Security benefits on several measures of well-being in retirement, such as the change in consumption expenditures at retirement, a self-assessed measure of how retirement years compare to the years before retirement, and whether the retired individual is worried about having enough income to get by. The analysis is based upon US data from the Health and Retirement Study, following individuals over a long time period from their fifties into retirement. We find that people who over estimated their Social Security benefits are worse off according to several measures of well being in retirement. This relationship seems to be more pronounced for respondents who claimed benefits earlier than anticipated than for those who were misinformed.

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File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp118.pdf
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Bibliographic Info

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp118.

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Length: 36 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:mrr:papers:wp118

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  1. Michael Hurd & Susann Rohwedder, 2005. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers 242, RAND Corporation Publications Department.
  2. Olivia S. Mitchell, 1987. "Worker Knowledge of Pension Provisions," NBER Working Papers 2414, National Bureau of Economic Research, Inc.
  3. John Ameriks & Andrew Caplin & John Leahy, 2007. "Retirement Consumption: Insights from a Survey," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 265-274, May.
  4. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-88, September.
  5. Alan L. Gustman & Thomas L. Steinmeier, 2001. "Imperfect Knowledge, Retirement and Saving," NBER Working Papers 8406, National Bureau of Economic Research, Inc.
  6. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2006. "Are Americans Saving "Optimally" for Retirement?," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 607-643, August.
  7. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001. "What Accounts for the Variation in Retirement Wealth among U.S. Households?," American Economic Review, American Economic Association, vol. 91(4), pages 832-857, September.
  8. Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
  9. Alan L. Gustman & Thomas L. Steinmeier, 1999. "What People Don't Know About Their Pensions and Social Security: An Analysis Using Linked Data from the Health and Retirement Study," NBER Working Papers 7368, National Bureau of Economic Research, Inc.
  10. Mark Aguiar & Erik Hurst, 2004. "Consumption vs. Expenditure," NBER Working Papers 10307, National Bureau of Economic Research, Inc.
  11. Raffaele Miniaci & Chiara Monfardini & Guglielmo Weber, 2003. "Is there a retirement consumption puzzle in Italy?," IFS Working Papers W03/14, Institute for Fiscal Studies.
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Cited by:
  1. Jeffrey B. Liebman & Erzo F. P. Luttmer, 2012. "The Perception of Social Security Incentives for Labor Supply and Retirement: The Median Voter Knows More Than You’d Think," NBER Chapters, in: Tax Policy and the Economy, Volume 26, pages 1-42 National Bureau of Economic Research, Inc.
  2. Steven Haider & Mel StephensJr., 2006. "How Accurate are Expected Retirement Savings?," Working Papers wp128, University of Michigan, Michigan Retirement Research Center.

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