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Optimal Social Security Claiming Behavior under Lump Sum Incentives: Theory and Evidence

Listed author(s):
  • Raimond Maurer
  • Olivia S. Mitchell
  • Ralph Rogalla
  • Tatjana Schimetschek

People who delay claiming Social Security receive higher lifelong benefits upon retirement. We survey individuals on their willingness to delay claiming later, if they could receive a lump sum in lieu of a higher annuity payment. Using a moment-matching approach, we calibrate a lifecycle model tracking observed claiming patterns under current rules and predict optimal claiming outcomes under the lump sum approach. Our model correctly predicts that early claimers under current rules would delay claiming most when offered actuarially fair lump sums, and for lump sums worth 87% as much, claiming ages would still be higher than at present.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23073.

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Date of creation: Jan 2017
Handle: RePEc:nbr:nberwo:23073
Note: AG LS
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