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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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    File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp129.pdf
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    References listed on IDEAS

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    1. 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.
    2. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, September.
    3. 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.
    4. Daniel S. Hamermesh, 1985. "Expectations, Life Expectancy, and Economic Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 389-408.
    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. 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.
    7. Oswald, Andrew & Jonathan Gardner, 2003. "Is it Money or Marriage that Keeps People Alive?," Royal Economic Society Annual Conference 2003 161, Royal Economic Society.
    8. 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 s268-s292.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Binswanger, Johannes & Salm, Martin, 2013. "Does Everyone Use Probabilities? Intuitive and Rational Decisions about Stockholding," IZA Discussion Papers 7265, Institute for the Study of Labor (IZA).
    2. 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.
    3. 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.
    4. Adeline Delavande & Robert Willis, 2007. "Managing the Risk of Life," Working Papers wp167, University of Michigan, Michigan Retirement Research Center.

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