Exchanging Delayed Social Security Benefits for Lump Sums: Could This Incentivize Longer Work Careers?
by Jing Jing Chai, Raimond H. Maurer, Olivia S. Mitchell and Ralph Rogalla
- We model the factors that could influence individuals to work longer if they could trade off Social Security benefit increases in exchange for an actuarially fair lump sum once they retire.
- This can afford people flexibility over the timing of their consumption decisions.
- Lump sums also permit people to leave assets to their heirs.
- Some people may wish to invest a portion of their lump sum amounts in the capital market.
- Offering a lump sum equivalent in expected present value to the delayed retirement credit could be cost-neutral to the system, on average.
- Giving the delayed retirement credit as a lump sum in exchange for delayed retirement could boost average retirement ages by 1.5-2 years.
- If older individuals worked longer voluntarily, this might enhance system solvency via additional payroll tax collections.