Why Are U.S. Households Claiming Social Security Later?



Over the past two decades, the share of individuals claiming Social Security at the Early Eligibility Age has dropped, and the average retirement age has increased.  At the same time, Social Security rules have changed substantially, employer-sponsored retirement plans have shifted from defined benefit (DB) to defined contribution (DC), health has improved, and mortality has decreased.  In theory, all of these changes could lead to a trend toward later claiming.  Disentangling the effect of any one change is difficult because they have been occurring simultaneously.  This paper uses the Gustman and Steinmeier structural model of retirement timing to investigate which of these changes matter most by simulating their effects on the original cohort (1931-1941 birth years) of the Health and Retirement Study (HRS).  The predicted behavior is then compared to the actual retirements of the Early Baby Boomer cohort (1948-1953 birth years) to see how much of the later cohort’s delayed claiming and retirement can be explained by these changes.

This paper found that:

  • The Early Baby Boomer cohort was less likely to be fully retired than the HRS cohort at both age 62 (36.7 percent vs. 44.0 percent) and age 64 (49.5 percent vs. 53.9 percent).
  • The model suggests that the shift from DB toward DC plans was the biggest contributor to these declines, followed by better health.
  • Changes to Social Security rules and improvements in mortality played smaller roles.
  • Taken together, the four changes explain about 60 percent of the drop in full retirement at 62 – the remainder could be due to changes in preferences or other changes not simulated like the rising cost of health care.

The policy implications of this paper are:

  • As DB plans continue to fade in the private-sector, claiming will likely be further delayed.
  • If health continues to improve, claiming could be moderately delayed.
  • The resumption of the increase in the Full Retirement Age is not likely to lead to substantial delays in claiming.

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