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Probabilistic Thinking and Early Social Security Claiming

Author

Listed:
  • Adeline Delavande

    (RAND Corporation and Universidade Nova de Lisboa and CEPR)

  • Michael Perry

    (University of Michigan)

  • Robert Willis

    (University of Michigan)

Abstract

This study analyzes the extent to which an individual’s survival expectations influence his or her decision to claim social security benefits at an early age. We find that subjective survival probabilities capture meaningful behavioral responses to incentives for early Social Security claiming when they are purged of measurement error using risk factors as instruments. Among people who are still working at age 62, those who expect to live longer are likely to delay claiming of Social Security benefits to a degree that is both statistically and economically significant. For example, an increase of 5 percentage points in the subjective probability of survival to age 75 of each person leads to a 1.9 percentage point decline in the proportion who claim before age 64, from 29.6 percent to 27.7 percent.

Suggested Citation

  • Adeline Delavande & Michael Perry & Robert Willis, 2006. "Probabilistic Thinking and Early Social Security Claiming," Working Papers wp129, University of Michigan, Michigan Retirement Research Center.
    • Handle: RePEc:mrr:papers:wp129
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    References listed on IDEAS

    as
    1. Adeline Delavande & Susann Rohwedder, 2008. "Differential Mortality in Europe and the U.S. Estimates Based on Subjective Probabilities of Survival," Working Papers 613, RAND Corporation.
    2. Daniel S. Hamermesh, 1985. "Expectations, Life Expectancy, and Economic Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 389-408.
    3. Oswald, Andrew & Jonathan Gardner, 2003. "Is it Money or Marriage that Keeps People Alive?," Royal Economic Society Annual Conference 2003 161, Royal Economic Society.
    4. Michael D. Hurd & Kathleen McGarry, 1995. "Evaluation of the Subjective Probabilities of Survival in the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages 268-292.
    5. Michael D. Hurd & James P. Smith & Julie M. Zissimopoulos, 2004. "The effects of subjective survival on retirement and Social Security claiming," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 761-775.
    6. Michael D. Hurd & Kathleen McGarry, 2002. "The Predictive Validity of Subjective Probabilities of Survival," Economic Journal, Royal Economic Society, vol. 112(482), pages 966-985, October.
    7. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, September.
    8. Gábor Kézdi & Robert J. Willis, 2003. "Who Becomes a Stockholder? Expectations, SUbjective Uncertainty, and Asset Allocation," Working Papers wp039, University of Michigan, Michigan Retirement Research Center.
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    1. repec:cup:judgdm:v:16:y:2021:i:4:p:1072-1096 is not listed on IDEAS
    2. Nicholas W. Papageorge & Matthew V. Zahn & Michèle Belot & Eline Broek-Altenburg & Syngjoo Choi & Julian C. Jamison & Egon Tripodi, 2021. "Socio-demographic factors associated with self-protecting behavior during the Covid-19 pandemic," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(2), pages 691-738, April.
    3. Joan Costa-Font & Cristina Vilaplana-Prieto, 2022. "Biased survival expectations and behaviours: Does domain specific information matter?," Journal of Risk and Uncertainty, Springer, vol. 65(3), pages 285-317, December.
    4. Giustinelli, Pamela & Manski, Charles F. & Molinari, Francesca, 2022. "Tail and center rounding of probabilistic expectations in the Health and Retirement Study," Journal of Econometrics, Elsevier, vol. 231(1), pages 265-281.
    5. Chenoweth, Erica & Hamilton, Barton H. & Lee, Hedwig & Papageorge, Nicholas W. & Roll, Stephen & Zahn, Matthew V., 2022. "Who Protests, What Do They Protest, and Why?," IZA Discussion Papers 15697, Institute of Labor Economics (IZA).
    6. Adeline Delavande & Robert Willis, 2007. "Managing the Risk of Life," Working Papers wp167, University of Michigan, Michigan Retirement Research Center.
    7. Martin Salm, 2010. "Subjective mortality expectations and consumption and saving behaviours among the elderly," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(3), pages 1040-1057, August.
    8. Adeline Delavande & Jinkook Lee & Seetha Menon, 2017. "Eliciting Survival Expectations of the Elderly in Low-Income Countries: Evidence From India," Demography, Springer;Population Association of America (PAA), vol. 54(2), pages 673-699, April.
    9. Binswanger, Johannes & Salm, Martin, 2013. "Does Everyone Use Probabilities? Intuitive and Rational Decisions about Stockholding," IZA Discussion Papers 7265, Institute of Labor Economics (IZA).
    10. David A. Comerford, 2021. "Apparent age and gender differences in survival optimism: To what extent are they a bias in the translation of beliefs onto a percentage scale?," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 16(4), pages 1072-1096, July.
    11. Bissonnette, L. & van Soest, A.H.O., 2010. "Retirement Expectations, Preferences, and Decisions," Other publications TiSEM 45e93b08-cc1d-47c6-ba06-d, Tilburg University, School of Economics and Management.
    12. Owen O'Donnell & Federica Teppa & Eddy van Doorslaer, 2008. "Can subjective survival expectations explain retirement behaviour?," DNB Working Papers 188, Netherlands Central Bank, Research Department.

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