Accounting for Social Security claiming behavior

Pashchenko, Svetlana and Porapakkarm, Ponpoje (2022): Accounting for Social Security claiming behavior.

Abstract

Social Security benefit claiming is highly concentrated at two ages, 62 and the full retirement age, which is hard to explain by the program's incentives. We study claiming and labor supply decisions in a structural framework and provide three main findings. First, we show that claiming behavior can be well explained by a parsimonious life-cycle model with fully rational agents. The two key mechanisms are (i) the strong unwillingness to hold annuities, (ii) the effects of the earnings test. Second, we show that current rules distort claiming and labor supply decisions, and eliminating these distortions results in large welfare gains. Finally, we show that claiming decisions can be used to sharpen the identification of important preference parameters.

• Item Type: MPRA Paper
• Language: English
• Keywords: Social Security, retirement, annuities, consumption and saving, life-cycle model
• Subjects: D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies

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