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Social Security Incentives for Retirement

In: Themes in the Economics of Aging

Author Info

Listed author(s):
  • 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.

(This abstract was borrowed from another version of this item.)

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This chapter was published in:
  • David A. Wise, 2001. "Themes in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise01-1.
    • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10332.
    Handle: RePEc:nbr:nberch:10332
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    Find related papers by JEL classification:
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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    1. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January.
    2. 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.
    3. Boskin, Michael J. & Hurd, Michael D., 1978. "The effect of social security on early retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 361-377, December.
    4. Samwick, Andrew A., 1998. "New evidence on pensions, social security, and the timing of retirement," Journal of Public Economics, Elsevier, vol. 70(2), pages 207-236, November.
    5. 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.
    6. 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.
    7. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
    8. Robin L. Lumsdaine & David A. Wise, 1994. "Aging and Labor Force Participation: A Review of Trends and Explanations," NBER Chapters,in: Aging in the United States and Japan: Economic Trends, pages 7-42 National Bureau of Economic Research, Inc.
    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. 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.
    11. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    12. Rebecca A. Luzadis & Olivia S. Mitchell, 1991. "Explaining Pension Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 26(4), pages 679-703.
    13. Feldstein, Martin & Samwick, Andrew A., 1992. "Social Security Rules and Marginal Tax Rates," National Tax Journal, National Tax Association, vol. 45(1), pages 1-22, March.
    14. 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.
    15. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, vol. 62(1), pages 117-156, January.
    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. Joseph F. Quinn & Richard V. Burkhauser & Daniel A. Myers, 1990. "Passing the Torch: The Influence of Economic Incentives on Work and Retirement," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number pt, June.
    18. Krueger, Alan B & Pischke, Jorn-Steffen, 1992. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 412-437, October.
    19. Kahn, James A., 1988. "Social security, liquidity, and early retirement," Journal of Public Economics, Elsevier, vol. 35(1), pages 97-117, February.
    20. David A. Wise, 1992. "Introduction to "Topics in the Economics of Aging"," NBER Chapters,in: Topics in the Economics of Aging, pages 1-19 National Bureau of Economic Research, Inc.
    21. Gary Burtless, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 781-805.
    22. Bruce D. Meyer, 1989. "A Quasi-Experimental Approach to the Effects of Unemployment Insurance," NBER Working Papers 3159, National Bureau of Economic Research, Inc.
    23. David A. Wise, 1992. "Topics in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise92-1.
    24. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-1180, September.
    25. Alan S. Blinder & Roger H. Gordon & Donald E. Wise, 1980. "Reconsidering the Work Disincentive Effects of Social Security," NBER Working Papers 0562, National Bureau of Economic Research, Inc.
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