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Social Security Incentives for Retirement

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  • Courtney Coile
  • Jonathan Gruber

Abstract

We present a detailed analysis of the incentives that Social Security provides for continued work at older ages. We do so using information on older males from the Health and Retirement Study over the 1980-1997 period to calculate the changes in the present discounted value of Social Security entitlements from additional work at each age. We find that the median male worker faces a small tax on work at ages 55-61, a near zero tax at ages 62-64, and a large tax at ages 65-69. However, there is significant heterogeneity in tax rates. We also document significant non-monotonicities in the accrual of Social Security entitlements with additional work, and suggest a more appropriate measure of incentive effects that considers accruals over not just the next year but future years as well.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7651.

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Date of creation: Apr 2000
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Publication status: published as Courtney Coile, Jonathan Gruber. "Social Security Incentives for Retirement," in David A. Wise, editor, "Themes in the Economics of Aging" University of Chicago Press (2001)
Handle: RePEc:nbr:nberwo:7651

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  1. 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.
  2. Michael J. Boskin & Michael D. Hurd, 1980. "The Effect of Social Security on Early Retirement," NBER Working Papers 0204, National Bureau of Economic Research, Inc.
  3. Kahn, James A., 1988. "Social security, liquidity, and early retirement," Journal of Public Economics, Elsevier, vol. 35(1), pages 97-117, February.
  4. Jerry A. Hausman & David A. Wise, 1985. "Social Security, Health Status, and Retirement," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 159-192 National Bureau of Economic Research, Inc.
  5. Martin Feldstein & Andrew Samwick, 1992. "Social Security Rules and Marginal Tax Rates," NBER Working Papers 3962, National Bureau of Economic Research, Inc.
  6. Andrew A. Samwick, 1998. "New Evidence on Pensions, Social Security, and the Timing of Retirement," NBER Working Papers 6534, National Bureau of Economic Research, Inc.
  7. Alan Krueger & Jorn-Steffen Pischke, 1989. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Working Papers 635, Princeton University, Department of Economics, Industrial Relations Section..
  8. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
  9. Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September.
  10. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-80, September.
  11. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, vol. 62(1), pages 117-56, January.
  12. Gary S. Fields & Olivia S. Mitchell, 1984. "Economic Determinants of the Optimal Retirement Age: An Empirical Investigation," Journal of Human Resources, University of Wisconsin Press, vol. 19(2), pages 245-262.
  13. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  14. David A. Wise & Robin L. Lumsdaine, 1990. "Aging and Labor Force Participation: A Review of Trends and Explanations," NBER Working Papers 3420, National Bureau of Economic Research, Inc.
  15. Alan S. Blinder & Roger H. Gordon & Donald E. Wise, 1981. "Reconsidering the Work Disincentive Effects of Social Security," NBER Working Papers 0562, National Bureau of Economic Research, Inc.
  16. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
  17. Bruce D. Meyer, 1989. "A Quasi-Experimental Approach to the Effects of Unemployment Insurance," NBER Working Papers 3159, National Bureau of Economic Research, Inc.
  18. Leora Friedberg, 1998. "The Social Security Earnings Test and Labor Supply of Older Men," NBER Chapters, in: Tax Policy and the Economy, Volume 12, pages 121-150 National Bureau of Economic Research, Inc.
  19. Christopher J. Ruhm, 1995. "Secular Changes in the Work and Retirement Patterns of Older Men," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 362-385.
  20. Burtless, Gary, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 781-805, October.
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