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How Changes in Social Security Affect Recent Retirement Trends

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  • Alan L. Gustman
  • Thomas Steinmeier

Abstract

According to CPS data, men 65 to 69 were about six percentage points less likely to be retired in 2004 than in 1992. CPS and Health and Retirement Study (HRS) data indicate a corresponding difference of 3 percentage points between 1998 and 2004. Simulations with a structural retirement model suggest changes in Social Security rules between 1992 and 2004 increased full time work of 65 to 67 year old married men by a little under 2 percentage points, about a 9 percent increase, and increased their labor force participation by between 1.4 and 2.2 percentage points, or 2 to 4 percent, depending on age. Social Security changes account for about one sixth of the increase in labor force participation between 1998 and 2004, for married men ages 65 to 67. These rule changes encourage deferring retirement from long term jobs, returning to full time work after retiring, and increasing partial retirement. Although married men in their fifties decrease their participation in the labor force over this period, this is not due to changes in Social Security, but may reflect other factors, including changes in disability.

Suggested Citation

  • Alan L. Gustman & Thomas Steinmeier, 2008. "How Changes in Social Security Affect Recent Retirement Trends," NBER Working Papers 14105, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14105
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    References listed on IDEAS

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    1. Alan L. Gustman & Thomas L. Steinmeier, 2008. "Projecting behavioral responses to the next generation of retirement policies," Research in Labor Economics, in: Work, Earnings and Other Aspects of the Employment Relation, pages 141-195, Emerald Group Publishing Limited.
    2. Costa, Dora L., 1998. "The Evolution of Retirement," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226116082, January.
    3. 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.
    4. Joseph F. Quinn, 1999. "Has the Early Retirement Trend Reversed?," Boston College Working Papers in Economics 424, Boston College Department of Economics.
    5. Anderson, Patricia M & Gustman, Alan L & Steinmeier, Thomas L, 1999. "Trends in Male Labor Force Participation and Retirement: Some Evidence on the Role of Pensions and Social Security in the 1970s and 1980s," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 757-783, October.
    6. Alan L. Gustman & Thomas L. Steinmeier, 2002. "Retirement and the Stock Market Bubble," NBER Working Papers 9404, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Coile Courtney C & Levine Phillip B, 2011. "The Market Crash and Mass Layoffs: How the Current Economic Crisis May Affect Retirement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-42, April.
    2. Gustman, Alan L. & Steinmeier, Thomas L., 2012. "Policy effects in hyperbolic vs. exponential models of consumption and retirement," Journal of Public Economics, Elsevier, vol. 96(5), pages 465-473.
    3. Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2010. "What the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 161-182, Winter.
    4. Carlos P�rez & �ngel Mart�n-Rom�n & Alfonso Moral, 2015. "The impact of leisure complementarity on the labour force participation of older males in Spain," Applied Economics Letters, Taylor & Francis Journals, vol. 22(3), pages 214-217, February.
    5. Jason Scott & John B. Shoven & Sita Slavov & John G. Watson, 2019. "Retirement Implications of a Low Wage Growth, Low Real Interest Rate Economy," NBER Working Papers 25556, National Bureau of Economic Research, Inc.
    6. Vere, James P., 2011. "Social Security and elderly labor supply: Evidence from the Health and Retirement Study," Labour Economics, Elsevier, vol. 18(5), pages 676-686, October.
    7. 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.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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