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Retirement Responses to Early Social Security Benefit Reductions

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  • Olivia S. Mitchell
  • John W.R. Phillips

Abstract

This paper evaluates potential responses to reductions in early Social Security retirement benefits. Using the Health and Retirement Study (HRS) linked to administrative records, we find that Social Security coverage is quite uneven in the older population: one-quarter of respondents in their late 50's lacks coverage under the Disability Insurance program, and one-fifth lacks coverage for old-age benefits. Among those eligible for benefits, respondents who subsequently retired early appear quite similar initially to those who later filed for normal retirement benefits, but both groups were healthier and better educated than those who later filed for disability benefits. Next we investigate the potential impact of curtailing, and then eliminating, early Social Security benefits. A life-cycle model of retirement behavior provides estimated parameters used to simulate the effects of cutting early Social Security benefits on retirement pathways. We find that cutting early Social Security benefits would boost the probability of normal retirement by twice as much as it would the probability of disability retirement.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7963.

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Date of creation: Oct 2000
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Handle: RePEc:nbr:nberwo:7963

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  1. Parsons, Donald O, 1980. "The Decline in Male Labor Force Participation," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 117-34, February.
  2. Steven Haider & Gary Solon, 2000. "Non Random Selection in the HRS Social Security Earnings Sample," Working Papers 00-01, RAND Corporation Publications Department.
  3. Leora Friedberg, 1998. "The Effect of Old Age Assistance on Retirement," NBER Working Papers 6548, National Bureau of Economic Research, Inc.
  4. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
  5. Gruber, Jonathan & Kubik, Jeffrey D., 1997. "Disability insurance rejection rates and the labor supply of older workers," Journal of Public Economics, Elsevier, vol. 64(1), pages 1-23, April.
  6. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  7. Haveman, Robert H. & Wolfe, Barbara L., 1984. "Disability transfers and early retirement: a casual relationship?," Journal of Public Economics, Elsevier, vol. 24(1), pages 47-66, June.
  8. Jonathan Gruber & Jeffrey D. Kubik, 1994. "Disability Insurance Rejection Rates and the Labor Supply of Older Workers," NBER Working Papers 4941, National Bureau of Economic Research, Inc.
  9. Hugo Benitez-Silva & Moshe Buchinsky & Hiu Man Chan & Sofia Cheidvasser & John Rust, 2000. "How Large is the Bias is Self-Reported Disability?," NBER Working Papers 7526, National Bureau of Economic Research, Inc.
  10. Phillip B. Levine & Olivia S. Mitchell & John W. Phillips, . "A Benefit of One's Own: Older Women's Retirement Entitlements Under Social Security," Pension Research Council Working Papers 2000-5, Wharton School Pension Research Council, University of Pennsylvania.
  11. Dwyer, Debra Sabatini & Mitchell, Olivia S., 1999. "Health problems as determinants of retirement: Are self-rated measures endogenous?," Journal of Health Economics, Elsevier, vol. 18(2), pages 173-193, April.
  12. Jianting Hu & Kajal Lahiri & Denton R. Vaughan & Bernard Wixon, 2001. "A Structural Model Of Social Security'S Disability Determination Process," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 348-361, May.
  13. Axel Boersch-Supan, 1999. "Incentive Effects of Social Security Under an Uncertain Disability Option," NBER Working Papers 7339, National Bureau of Economic Research, Inc.
  14. Gustman, A.L. & Mitchell, O.S. & Steinmeier, T.L., 1993. "The Role of Pensions in the Labor Market," Papers 93-07, Cornell - Center for Advanced Human Resource Studies.
  15. Haveman, Robert H & Wolfe, Barbara L, 1984. "The Decline in Male Labor Force Participation: Comment," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 532-41, June.
  16. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
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Cited by:
  1. Duggan, Mark & Singleton, Perry & Song, Jae, 2007. "Aching to retire? The rise in the full retirement age and its impact on the social security disability rolls," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1327-1350, August.
  2. Olivia S. Mitchell & John W.R. Phillips, 2002. "Applications, Denials, and Appeals for Social Security Disability Insurance," Working Papers wp032, University of Michigan, Michigan Retirement Research Center.
  3. John Bound & Todd Stinebrickner & Timothy Waidmann, 2007. "Health, Economic Resources and the Work Decisions of Older Men," NBER Working Papers 13657, National Bureau of Economic Research, Inc.
  4. Christian Keuschnigg & Mirela Keuschnigg & Christian Jaag, 2009. "Aging and the Financing of Social Security in Switzerland," University of St. Gallen Department of Economics working paper series 2009 2009-26, Department of Economics, University of St. Gallen.
  5. Chen Song & Louis Nguyen, 2003. "The Effect of Hernias on the Labor Force Participation of Union Army Veterans," NBER Chapters, in: Health and Labor Force Participation over the Life Cycle: Evidence from the Past, pages 253-310 National Bureau of Economic Research, Inc.
  6. John Bound & Todd Stinebrickner & Timothy Waidman, 2004. "Using a Structural Retirement Model to Simulate the Effect of Changes to the OASDI and Medicare Programs," Working Papers wp091, University of Michigan, Michigan Retirement Research Center.
  7. Euwals, Rob & van Vuren, Annemiek & van Vuuren, Daniel, 2011. "The Decline of Early Retirement Pathways in the Netherlands: An Empirical Analysis for the Health Care Sector," IZA Discussion Papers 5810, Institute for the Study of Labor (IZA).
  8. Marjan, MAES, 2008. "Does the dismantlement of early retirement schemes increase unemployment in Belgium ?," Discussion Papers (ECON - Département des Sciences Economiques) 2008041, Université catholique de Louvain, Département des Sciences Economiques.
  9. Coile, Courtney C. & Levine, Phillip B., 2007. "Labor market shocks and retirement: Do government programs matter?," Journal of Public Economics, Elsevier, vol. 91(10), pages 1902-1919, November.
  10. Andrew Au & Olivia S. Mitchell & John W.R. Phillips, 2005. "Saving Shortfalls and Delayed Retirement," Working Papers wp094, University of Michigan, Michigan Retirement Research Center.
  11. Olivia S. Mitchell & John W.R. Phillips, 2001. "Eligibility for Social Security Disability Insurance," Working Papers wp011, University of Michigan, Michigan Retirement Research Center.
  12. Xiaoyan Li & Nicole Maestas, 2008. "Does the Rise in the Full Retirement Age Encourage Disability Benefits Applications? Evidence from the Health and Retirement Study," Working Papers wp198, University of Michigan, Michigan Retirement Research Center.
  13. Rob Euwals & Daniel van Vuuren & Annemiek van Vuren, 2011. "The impact of reforms on labour market exit probabilities," CPB Discussion Paper 179, CPB Netherlands Bureau for Economic Policy Analysis.

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