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Recent Changes in the Gains from Delaying Social Security

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  • John B. Shoven
  • Sita Nataraj Slavov

Abstract

Social Security retirement benefits can be claimed at any age between 62 and 70, with delayed claiming resulting in larger monthly payments. In Shoven and Slavov (2013), we show that claiming later increases the present value of lifetime benefits for most individuals. However, this has not always been the case. During the late 1990s and early 2000s, a number of policy changes increased the gains from delay, particularly for couples. In addition, mortality improved and real interest rates fell substantially over this period, further increasing the attractiveness of delay. We perform simulations to examine the role of these factors in changing the gains from delay. We find that the gains from delay increased substantially after 2000, with changes in the interest rate playing the largest role in driving the increase. Using data from the Health and Retirement study, we show that individuals who turned 62 after 2000 are indeed more likely to delay than those who turned 62 before 2000. However, even in the younger cohort, most individuals still claim benefits soon after turning 62. Moreover, we find no evidence of a relationship between the probability of delay and the individual characteristics (e.g., gender, race, or health status) that affect the gains from delay.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19370.

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Date of creation: Aug 2013
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Handle: RePEc:nbr:nberwo:19370

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  1. Jeffrey B. Liebman & Erzo F.P. Luttmer, 2011. "Would People Behave Differently If They Better Understood Social Security? Evidence From a Field Experiment," NBER Working Papers 17287, National Bureau of Economic Research, Inc.
  2. Michael Hurd & James P. Smith & Julie M. Zissimopoulos, 2003. "The Effects of Subjective Survival on Retirements and Social Security Claiming," Working Papers 03-11, RAND Corporation Publications Department.
  3. Jeffrey R. Brown & Arie Kapteyn & Olivia S. Mitchell, 2011. "Framing Effects and Expected Social Security Claiming Behavior," NBER Working Papers 17018, National Bureau of Economic Research, Inc.
  4. Andrew Beauchamp & Mathis Wagner, 2012. "Dying to Retire: Adverse Selection and Welfare in Social Security," Boston College Working Papers in Economics 818, Boston College Department of Economics, revised 15 Aug 2013.
  5. Natalia A. Jivan, 2004. "How Can The Actuarial Reduction For Social Security Early Retirement Be Right?," Just the Facts jtf11, Center for Retirement Research.
  6. Alicia H. Munnell & Alex Golub-Sass & Nadia Karamcheva, 2009. "Strange But True: Claim Social Security Now, Claim More Later," Issues in Brief ib2009-9-9, Center for Retirement Research, revised Apr 2009.
  7. Alicia H. Munnell & Steven A. Sass, 2012. "Can the Actuarial Reduction for Social Security Early Retirement Still Be Right?," Issues in Brief ib2012-6, Center for Retirement Research, revised Mar 2012.
  8. Steven A. Sass & Wei Sun & Anthony Webb, 2007. "Why Do Married Men Claim Social Security Benefits So Early? Ignorance or Caddishness?," Working Papers, Center for Retirement Research at Boston College wp2007-17, Center for Retirement Research, revised Oct 2007.
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Cited by:
  1. Andreas Hubener & Raimond Maurer & Olivia S. Mitchell, 2013. "How Family Status and Social Security Claiming Options Shape Optimal Life Cycle Portfolios," Working Papers wp293, University of Michigan, Michigan Retirement Research Center.

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