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Probabilistic Thinking and Early Social Security Claiming

  • Adeline Delavande

    (RAND Corporation and Universidade Nova de Lisboa and CEPR)

  • Michael Perry

    (University of Michigan)

  • Robert Willis

    (University of Michigan)

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.

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Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp129.

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Length: 23 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:mrr:papers:wp129
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  1. Oswald, Andrew & Jonathan Gardner, 2003. "Is it Money or Marriage that Keeps People Alive?," Royal Economic Society Annual Conference 2003 161, Royal Economic Society.
  2. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  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 Publications Department.
  4. Daniel S. Hamermesh, 1982. "Expectations, Life Expectancy, and Economic Behavior," NBER Working Papers 0835, National Bureau of Economic Research, Inc.
  5. Michael D. Hurd & Kathleen McGarry, 1997. "The Predictive Validity of Subjective Probabilities of Survival," NBER Working Papers 6193, National Bureau of Economic Research, Inc.
  6. 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.
  7. 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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