Labor Market Shocks and Early Social Security Benefit Claiming
Authors
Abstract
Many job-losers suffer large and persistent losses in earnings capacity. For displaced workers who are age-eligible, one reaction to these losses is to begin claiming Social Security retirement benefits. We use administrative earnings records from the Social Security Administration’s Continuous Work History Sample to study the impacts of labor market shocks among workers in their late 50’s and early 60’s on Social Security retirement benefit claiming rates. We find that labor market shocks lead to current and future increases in the fraction of insured workers who initiate Social Security benefits at the earliest possible claiming age. Moreover, once they initiate benefits, early claimants continue to have low levels of earnings in all subsequent years.
Key Findings
· In this paper, we use administrative data from the Social Security Administration’s Continuous Work History Sample to study the effects of recent and lagged labor-market shocks on the rate of initiation of Social Security retirement benefit claims. We also examine the patterns of earnings changes associated with early claiming, and provide estimates of the impacts of early claiming on earnings after age 62.
· There is strong evidence that people who experience negative labor-market shocks in their late 50s and early 60s are likely to begin claiming Social Security retirement benefits as soon as they can.
· This is evident both from the downward trend in their earnings prior to age 62, and from the strong correlation between early claiming and local labor-market shocks experienced between ages 57 and 62.
· Once they begin receiving benefits, early claimers have very low earnings (typically less than $2,500 per year), regardless of how much they were earning in the years prior to claiming.
· Interestingly, the post-initiation earnings of people who begin claiming benefits at age 62 are not very different from those who begin claiming at ages 63 or 64, while early claimants as a group are substantially different from those who initiate benefits on or after their FRA.
Citation
David Card, Nicole Maestas, and Patrick Purcell. 2014. "Labor Market Shocks and Early Social Security Benefit Claiming." Ann Arbor MI: University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2014-317. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp317.pdf
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Paper ID
WP 2014-317Publication Type
Working Paper