Individuals’ Responses to Social Security Reform
AbstractThe Social Security trust fund is predicted to be depleted by 2041. While there are several viable reform proposals to restore long-term solvency of the Social Security system, one important element that is critical to the success of any reform remains unknown: how will individuals respond to, for example, a cut of their Social Security benefits. Will they work longer or save more or both, and to what extent will their response make up for the cut in benefits? In this paper we use data from the HRS Internet Survey where we asked respondents directly what they would do if everyone’s Social Security benefits were cut by 30 percent. At a qualitative level, we find important differences in the response by sex, marital status, and SES, among others. We conduct a detailed quantitative analysis of response to timing of Social security claiming and find that on average individuals would postpone claiming Social Security by 1.13 years. If this time was spent working by everyone then the annual Social Security benefit would drop on average by 20 percent rather than the initial 30 percent imposed by the reform. In other words the response to claim later and work longer would make up for one third of the initial cut in Social Security benefits.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp182.
Length: 32 pages
Date of creation: Sep 2008
Date of revision:
Contact details of provider:
Postal: P.O. Box 1248, Ann Arbor, MI 48104
Phone: (734) 615-0422
Fax: (734) 647-4575
Web page: http://www.mrrc.isr.umich.edu/publications/papers/
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-17 (All new papers)
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.:
- Emma Aguila, 2008.
"Personal Retirement Accounts and Saving,"
600, RAND Corporation Publications Department.
- Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security And Households' Saving," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1075-1119, August.
- Adeline Delavande & Susann Rohwedder, 2008. "Eliciting Subjective Expectations in Internet Surveys," Working Papers 589, RAND Corporation Publications Department.
- Orazio Attanasio & Susanne Rohwedder, 2001. "Pension wealth and household saving: evidence from pension reforms in the UK," IFS Working Papers W01/21, Institute for Fiscal Studies.
- Alan Gustman & Thomas Steinmeier, 2007.
"Projecting Behavioral Responses to the Next Generation of Retirement Policies,"
wp153, University of Michigan, Michigan Retirement Research Center.
- Alan L. Gustman & Thomas Steinmeier, 2007. "Projecting Behavioral Responses to the Next Generation of Retirement Policies," NBER Working Papers 12958, National Bureau of Economic Research, Inc.
- Grip Andries de & Lindeboom Maarten & Montizaan Raymond, 2009. "Dreams: The Effects of Changing the Pension System Late in the Game," Research Memoranda 043, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (MRRC Administrator).
If references are entirely missing, you can add them using this form.