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Older People’s Willingness to Delay Social Security Claiming

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Abstract

We designed and fielded an experimental module in the 2014 HRS which seeks to measure older persons’ willingness to voluntarily defer claiming of Social Security benefits. In addition we evaluate the stated willingness of older individuals to work longer, depending on the Social Security incentives offered to delay claiming their benefits. Our project extends previous work by analyzing the results from our HRS module and comparing findings from other data sources, which included very much smaller samples of older persons. We show that half of the respondents would delay claiming if no work requirement were in place under the status quo, and only slightly fewer, 46 percent, with a work requirement. We also asked respondents how large a lump sum they would need with or without a work requirement. In the former case, the average amount needed to induce delayed claiming was about $60,400, while when part-time work was required, the average was $66,700. This implies a low utility value of leisure foregone of only $6,300, or about 10 percent of older households’ income.

Key Findings

  • In our HRS module, we show that many older Americans would be willing to delay claiming their Social Security benefits if they were offered an actuarially fair lump sum to do so.
  • Overall, half of the respondents say they would delay claiming if no work requirement were in place under the status quo, and only slightly fewer with a work requirement.
  • If no work is required, the average amount needed to induce delayed claiming is about $60,400, while when part-time work is required, the average is $66,700. This implies a low utility value of leisure foregone of only $6,300, or under 20% of average household income.
  • Delayed claiming would have a positive effect on their retirement security, in that their Social Security income streams rise per year of delay. Indeed benefits, claimed at age 70 are over 75% higher than at age 62.

Citation

Maurer, Raimond, and Olivia S. Mitchell. 2016. "Older People's Willingness to Delay Social Security Claiming." University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2016-346. Ann Arbor, MI. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp346.pdf

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Project

Paper ID

WP 2016-346

Publication Type

Working Paper

Publication Year

2016