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​​by John B. Shoven, Ph.D.; Sita Nataraj Slavov, Ph.D.; and David A. Wise, Ph.D.

John B. Shoven, Ph.D., is the Charles R. Schwab Professor of Economics at Stanford. He is also a senior fellow at the Hoover Institution, a research associate of the National Bureau of Economic Research, and a chairman of the board of directors of Cadence Design Systems.

Sita Nataraj Slavov, Ph.D., is a professor at the Schar School of Policy and Government at George Mason University. She is also a faculty research fellow at the National Bureau of Economic Research and a visiting scholar at the American Enterprise Institute.

David A. Wise, Ph.D., is the John F. Stambaugh Professor of Political Economy, Emeritus, at the John F. Kennedy School of Government at Harvard University. He is also the former director of the Program on the Economics of Aging, and the former director of the Disability Research Center and the Retirement Research Center at the National Bureau of Economic Research.

Authors’ disclosure: This research was funded by grant number G-2014-13657 from the Alfred P. Sloan Foundation to the National Bureau of Economic Research. We thank participants at the 2017 NBER/IFS workshop on the increase in work at older ages.

Editor’s note: This research was originally published as an NBER working paper at nber.org/papers.html, where it was circulated for discussion and comment purposes. The version published here has been revised per the Journal’s peer review process. At least one co-author has disclosed a financial relationship of potential relevance for this research at nber.org/papers/w23729.ack​.

Executive Summary

  • Although research shows that there are large gains in lifetime wealth from delaying Social Security claiming, most people claim at or before full retirement age.
  • An original, nationally representative survey was fielded to gain insight into people’s rationales for their Social Security claiming decisions, their satisfaction with their past claiming decisions, and how they financed any gap between retirement and claiming.
  • Common rationales for claiming Social Security before full retirement age included stopping work, liquidity, poor health, and concerns about future benefit cuts due to policy changes.
  • Claiming upon stopping work and claiming at full retirement age appeared to be viewed as social norms.
  • Individuals who claimed at full retirement age were more satisfied with their claiming decisions than individuals who claimed early or delayed.
  • There was little evidence that claiming decisions and rationales for claiming were correlated with financial literacy or knowledge of Social Security rules.

Social security retirement benefits can be claimed at any age between 62 and 70,¹ with individuals receiving larger monthly payments for later claims. These larger monthly payments are sometimes described as an actuarial adjustment intended to compensate for the fact that those who claim later will receive fewer monthly payments over their lifetime. However, the literature has documented that this adjustment is actuarially advantageous for important groups of people, such as primary earners (Meyer and Reichenstein 2010; Munnell and Soto 2005; Sass, Sun, and Webb 2007, 2013; Coile, Diamond, Gruber, and Jousten 2002; Mahaney and Carlson 2007; Shoven and Slavov 2014a, 2014b; Kotlikoff, Moeller, and Solman 2015).

Research focusing on more recent cohorts has suggested that most primary earners and singles gain from some degree of delay due to historically low interest rates, changes in Social Security rules, and longer life expectancy (Meyer and Reichenstein 2010, 2012; Sass, Sun, and Webb 2013; and Shoven and Slavov 2014a, 2014b). But despite the large and growing gains from delay, most people claim at or before their full retirement age. Moreover, as Rabinovich and Samek (2018) documented through interviews with focus groups, most people report being satisfied with their claiming decisions even when they claimed before full retirement age.

Why Don’t Individuals Delay Claiming?

Claiming before full retirement age has numerous potential explanations. First, individuals may want to stop working and lack liquidity to finance the period between retirement and claiming. Members of Rabinovich and Samek’s (2018) focus groups suggested that liquidity was a factor in their decision to claim early. However, Goda, Ramnath, Shoven, and Slavov (2018) showed that one-third to two-thirds of individuals have sufficient retirement wealth to finance a two-year gap between retirement and claiming. In addition, many individuals who claim Social Security before full retirement age simultaneously delay withdrawing money from their retirement accounts until they are forced to do so at age 70½, a behavior that is inconsistent with the liquidity explanation. However, liquidity may be a rationale for some individuals who lack retirement wealth. Alternatively, individuals may view their retirement accounts and their Social Security wealth differently, being more willing to tap into the latter but not the former. Bequest motives may be one reason for this difference.

Second, individuals may not believe they will live long enough to gain from delaying Social Security. Indeed, some studies have documented that individuals who have higher subjective or actual mortality risk tend to claim earlier (Goda, Ramnath, Shoven, and Slavov 2018; Hurd, Smith, and Zissimopoulos 2004; Glickman and Hermes 2015; Beauchamp and Wagner 2012; Waldron 2002). Members of Rabinovich and Samek’s (2018) focus groups also cited mortality risk as factor in claiming early. However, high mortality risk is not likely to explain why most people claim at or before full retirement age, particularly given that even those with twice the average mortality risk stand to gain from delay (Shoven and Slavov 2014a).

Third, individuals may undervalue annuities. The literature has documented the “annuity puzzle,” a phenomenon where people fail to purchase annuities even though the insurance value they provide raises expected lifetime utility (Yaari 1965; Mitchell, Poterba, Warshawsky, and Brown 1999; Warner and Pleeter 2001). Delaying Social Security is equivalent to purchasing an annuity, because it involves sacrificing current income in exchange for higher income for the remainder of life. And, unlike retail annuities, the Social Security annuity obtained from delay is available at a price that is better than actuarially fair. Thus, failure to delay Social Security may be a manifestation of the annuity puzzle.

Standard economic models suggest that the gains from delay should be even larger when the insurance value of the Social Security annuity is considered (Sun and Webb 2009). In fact, Maurer, Mitchell, Rogalla, and Schimetschek (2016) presented survey evidence showing that people would be more willing to delay claiming if the gains from delay were paid as an actuarially fair lump sum rather than as an annuity.

In most instances of the annuity puzzle, it is unclear whether individuals are making mistakes when they fail to annuitize their wealth, or whether economic models simply do not accurately capture individuals’ preferences for annuitization. However, a few studies have documented behavior that is most likely a mistake (Bronshtein, Scott, Shoven, and Slavov 2016; Brown, Kapteyn, Luttmer, Mitchell, and Samek 2017).

Fourth, it is possible that claiming at the designated full retirement age is a social norm because individuals view it as a reference point or a recommendation from the government. Behaghel and Blau (2012) showed that both claiming Social Security benefits and retirement tend to cluster around the full retirement age as the full retirement age increases, even though benefits increase continuously with claiming age from age 62 through 70. In addition, claiming upon stopping work may be a social norm. Notably, Social Security Administration publications have used the term “retirement” interchangeably with “claiming” even though retirement and claiming need not occur simultaneously, and even though the optimal approach to drawing down on retirement wealth may be to tap into other assets before claiming Social Security.

Fifth, individuals may be unaware of the rules surrounding Social Security delay. Liebman and Luttmer (2015) showed that individuals accurately estimate the gains from delay between age 62 and full retirement age, but they underestimate the gains from delay between full retirement age and age 70. However, providing information about the gains from delay does not appear to change actual claiming behavior.

Finally, individuals may fear that if they do not claim early, their Social Security benefits may be cut when policy makers enact reform to restore solvency to the program. Regardless of whether this fear is realistic, it may influence claiming decisions.

Research Goal

Although there are many possible explanations for why individuals fail to take advantage of the gains from delaying Social Security, previous research has not found conclusive evidence to support any of them. The research described in this article explored these hypotheses by fielding an original, nationally representative survey to learn about people’s rationales for their claiming decisions and their satisfaction with past claiming decisions.

The goal was not to explore actual claiming patterns or claiming incentives—or whether the former are consistent with the latter—as these topics have been covered extensively in the previous literature cited above. Moreover, because of the complexity of the rules and individual situations, the survey data did not include sufficiently detailed information to determine the claiming incentives facing each respondent except in a very broad way (e.g., based on marital status and primary earner status).

The goal was rather to examine individuals’ perceptions about their past or future claiming decisions, particularly in situations where they did not delay beyond full retirement age. Asking individuals to rationalize their claiming decisions ex post is unlikely to provide definitive answers as to why people claim Social Security early; however, it can suggest possible hypotheses to explore in future research, as well as ways to modify theoretical models to better predict behavior. It can also provide insights for financial planners into how individuals think about their retirement and Social Security claiming decisions. The survey also asked individuals who had a significant gap between retirement and claiming how they financed the delay period.2

The results reported in this paper are complementary to Rabiniovich and Samek (2018). Relative to that research, the survey conducted here was more systematic and administered to a nationally representative sample, although the responses were less flexible than in a focus group format.

Survey responses suggested that individuals who claimed early did so because they had stopped working, lacked liquidity, were in poor health, or feared Social Security benefits would be cut in the future. Most people were satisfied with their past claiming decisions, although those who claimed at full retirement age were more satisfied than those who claimed early or delayed. Most people reported that they were aware of the gains from delay but were not influenced by them. Individuals who claimed at either age 62 or full retirement age were less likely to report being influenced by the gains from delay.

The survey indicated no systematic relationship between financial literacy or Social Security knowledge and claiming behavior or rationales for claiming. Overall, there was strong evidence that people view claiming at full retirement age and claiming upon retirement as social norms. Although claiming and retirement are strongly linked, the roughly 25 percent of the sample who reported a gap of two or more years between retirement and claiming used employer-sponsored pensions and other savings to finance the delay.

Survey Data: Demographics and Restrictions

An original survey (“Social Security Claiming Decisions: Survey Evidence,” UAS 70) was designed and fielded as part of the Understanding America Study (UAS) from January 9, 2017 to March 13, 2017. UAS (uasdata.usc.edu) is a nationally representative internet panel of the University of Southern California, consisting of approximately 6,000 households. The survey was sent to the subset of 2,206 individuals aged 55 and older. Respondents were paid $3 to complete the survey. The response rate was just over 80 percent, providing 1,783 observations. Of this sample, 991 individuals indicated they were currently receiving Social Security benefits, and 705 indicated that they expected to receive benefits in the future (the rest either did not expect to receive benefits or skipped the question).

Among those who had claimed Social Security, the sample was restricted to individuals who were receiving retired worker benefits at the time of the survey and had received retired worker benefits at the time of their initial claim. (Throughout the remainder of this paper, retirement benefits earned on one’s own record are referred to as retired worker benefits, in contrast to benefits earned on a spouse’s record, which are referred to as spousal benefits, or a deceased spouse’s record, which are referred to as survivor benefits.)

Individuals who reported claiming retired worker benefits before age 62 (not plausible) and individuals who reported having never worked in the past were also excluded. Among individuals who had not claimed Social Security, those who expected to receive anything other than retired worker benefits, expected to claim before age 62, or expected to claim before their survey date in 2017 were excluded.

Another handful of observations were dropped due to missing values for some of the variables used in the analysis. A few individuals with a missing sampling weight (individuals who were not part of the nationally representative sample aged 55-plus) were also dropped. This selection resulted in a final sample of 558 individuals who had claimed Social Security benefits at the time of the survey and another 553 who had yet to claim benefits. The dataset provided by UAS included both responses to the original survey questions as well as a set of basic demographic variables on the respondents from previous surveys.

The restriction to individuals who received retired worker benefits both initially and at the time of the survey removed primary earners in two-earner couples who claimed spousal benefits initially and switched to retired worker benefits (which continue to grow through delay) as part of an optimal Social Security delay strategy. These “unusual” claiming strategies were described in detail in Munnell, Golub-Sass, and Karamcheva (2013). However, prior research summarized earlier in this paper showed that most people fail to follow optimal claiming strategies. The survey results were consistent with that finding. Only 59 of the 991 individuals currently receiving Social Security claimed a spousal benefit initially, and among these, 13 reported valid claiming ages that were at or above their full retirement age. The strategy of claiming a spousal benefit alone while allowing one’s own retired worker benefit to grow through delay requires waiting until full retirement age. Thus, most of these spousal benefit claimers were not likely to be making strategic use of the spousal benefit.

Understanding Claiming Incentives

Individuals in the sample faced different claiming incentives. Although the purpose of this study was not to examine claiming incentives in detail, it is possible that perceptions about claiming may be correlated with these incentives in ways that give rise to interesting hypotheses about claiming behavior. Therefore, broad groups that likely faced stronger or weaker incentives to delay were identified.

Primary earners. Prior research has shown that primary earners realize the largest gains from delaying their own retired worker benefit, followed by single women, then single men; secondary earners have only weak incentives to delay (Shoven and Slavov 2014a, 2014b). Marital status was asked directly in the survey, and gender was available in the basic demographic information provided by UAS.

Among married couples in the sample, primary earners were identified based on a question asking married respondents which spouse’s lifetime earnings were greater. Responding to this question with “mine were higher” or “about the same” resulted in an individual being classified as a primary earner. This indicator was a proxy, with measurement error due to reporting as well as the possibility that the spouse with higher lifetime earnings may not have spent his or her entire career in covered employment.

Widows. Additionally, widows face different claiming incentives. Widows have the option of claiming their own retired worker benefits initially, allowing their survivor benefit to grow through delay (up to full retirement age). Or, widows can claim the survivor benefit as early as age 60 and allow their retired worker benefit to grow through delay (Shuart, Weaver, and Whitman 2010).

As noted previously, such strategic claiming is likely uncommon. Moreover, the restriction to individuals who both initially and at the time of the survey received retired worker benefits should have excluded those who claimed survivor benefits first with the intention of switching, as well as those who claimed retired worker benefits first and switched to survivor benefits before the survey date. However, the sample could have included those who claimed retired worker benefits first but had not yet switched to survivor benefits at the time of the survey (one free-form response did refer to such a strategy).

A widow status indicator was created taking on the value of 1 if the individual was classified as widowed, either by the UAS 70 survey questions relating to marital status or by the demographic background variables provided by UAS. Again, the indicator was a proxy for widow status as individuals can have complex marital histories that were not reflected in the survey.

File-and-suspend. Additional recent changes to claiming rules affected the incentives of some couples in the sample. One-earner couples (in which the secondary or non-earner expects to claim a spousal benefit) were affected by the elimination of a provision known as file-and-suspend. In general, a primary earner must have filed for his or her own retired worker benefit before the spouse can receive a spousal benefit. However, spousal benefits do not grow with delay beyond the spouse’s full retirement age. File-and-suspend allowed the primary earner to file for benefits upon reaching full retirement age (thereby allowing the spouse to claim a spousal benefit) but immediately suspend the claim and continue to take advantage of the gains from delay. The elimination of file-and-suspend strengthened the incentives for primary earners to claim before age 70.

Shoven and Slavov (2014b) showed that for stylized couples, a primary earner who can file-and-suspend should wait until age 70 to claim. On the other hand, a primary earner who is unable to file-and-suspend is often better off claiming before age 70; however, even without file-and-suspend, some degree of delay beyond full retirement age was likely still optimal. In the sample, primary earners who were unable to file-and-suspend were identified as those who had not reached full retirement age prior to April 2016.

Restricted application. Two-earner couples could use another provision, referred to as restricted application, in conjunction with file-and-suspend to maximize benefits. Specifically, one spouse (often the primary earner) could use the restricted application provision to claim a spousal benefit at full retirement age while allowing for his or her retired worker benefit to grow through delay. The restricted application provision was eliminated in 2015 for those born after January 1, 1954; for these individuals, filing for a spousal benefit would result in deemed claiming of the retired worker benefit as well.

Strategic use of the spousal benefit by two-earner couples was likely rare, and any individuals using it would have been eliminated by the sample restriction that excluded respondents who received spousal benefits or switched benefit types. Thus, individuals who were eligible for restricted application were not identified.

Financial Knowledge

Because UAS is an ongoing panel, it was possible to merge in some relevant variables from previous waves of the survey. Specifically, data from surveys on financial literacy (UAS 6) and knowledge about Social Security (UAS 16) were merged into the sample analyzed here.

Financial literacy. The financial literacy survey included questions about interest rates, inflation, and investments. A summary score, indicating the number of correct answers out of 20, was also provided.

Social Security knowledge. The Social Security knowledge survey included a series of 10 questions (one multiple choice and nine true-false) on specific features of Social Security, including how benefits are calculated, who is eligible for benefits, and the gains from delaying claiming. An index was constructed by summing the number of correct answers. The index was set to missing for individuals who did not answer any of the questions. However, a skipped question was treated as an incorrect answer for individuals who answered at least one of the questions.

Within the set of 10 questions, there was one true-false question that specifically referred to the gains from delay: “Social Security benefits are not affected by the age at which someone starts claiming.” Another true-false question referred to the link between claiming and retirement: “Social Security benefits have to be claimed as soon as someone retires.” Because these questions are particularly relevant to the claiming decision, some of the analysis focused on them individually.

The Social Security knowledge survey also included a measure of self-reported health on a five-point scale. An indicator for “good health” was constructed, taking on a value of 1 if the individual’s self-reported health was 3 (good), 2 (very good), or 1 (excellent), and 0 if it was 4 (fair) or 5 (poor).

Work Status and Financing the Gap

Individuals who had claimed Social Security benefits were asked about their work status and the date they last worked if they were not currently working. Of the 558 individuals who had claimed benefits, 409 reported not currently working. The date an individual last worked was defined as his or her retirement date.

Individuals who reported a gap of more than two years between retirement and claiming were asked how they financed the period between retirement and claiming. Options included savings, income from an employer-sponsored pension, a spouse’s income, assistance from family and friends, a loan, or a mortgage. Individuals were asked to select all that applied, and they were also provided with an “other” option that allowed them to specify their own response. Of the 97 individuals with a gap of more than two years, 96 answered this question (results are shown in Table 1).


 

Rationale for Claiming Decision

Individuals who had claimed were asked to indicate their agreement with the statement: “I am satisfied with my decision on when to start Social Security benefits,” with responses ranging from strongly disagree to strongly agree. Of the 558 individuals who had claimed, 557 responded to this question.

Individuals who had claimed before their full retirement age were asked their rationale for doing so. Of the 445 individuals who had claimed before full retirement age, 444 of them had valid responses to this question. (One individual was missing a valid response due to reporting a birth year that was most likely incorrect. Further details are available upon request.)

Those who had claimed at or up to six months after reaching full retirement age were asked their rationale for claiming at (or shortly after) full retirement age. The six-month window allowed for the possibility of procrastination; indeed, in the sample of those who had claimed Social Security, 44 people reported claiming in the month of turning their full retirement age, and another 14 claimed in the following two months. This number gradually diminished, with nine respondents claiming three to six months after reaching full retirement age. Of the 67 people who had claimed within six months of full retirement age, 64 had valid responses to this question.3

Those who had claimed more than six months after full retirement age were asked their rationale for delaying. All 46 individuals who had claimed more than six months after full retirement age had valid responses to this question.

Among individuals who had not yet claimed, those who had reached age 62 were identified and asked about their rationale for not having claimed yet. All 129 of these individuals had valid responses to this question.4 For the questions about rationale for claiming, respondents were provided with a list of possible reasons and asked to select all that apply. In addition, there was an “other” option that allowed a free form text response. The order of the reasons (except for “other,” which always appeared last) were randomized across individuals.

Finally, individuals who had claimed and were born in 1943 or later were asked about their awareness of the rules surrounding delay. For individuals born in 1943 or later, benefits increase by 8 percent of the benefit available at full retirement age for each year of delay through age 70. (Previous cohorts received less generous adjustments.) Prior to the full retirement age, benefits increase by around 7 to 8 percent per year with delay, though the exact percentage varies with age. In addition, benefits for surviving spouses are based on the higher of the two individual benefits. This rule generates a large portion of the gains from delay for primary earners who can pass on a higher benefit to their widows (Sass, Sun, and Webb 2013).

Individuals were asked whether they were aware of these rules, and if so, to what extent they influenced their claiming decisions. Of the 403 individuals who had claimed and were born in 1943 or later, 183 were identified as married primary earners who would likely be affected by the survivor benefit provision.

Post-stratification weights were included with the UAS survey data. UAS assigned these weights after data were collected to ensure that the weighted sample distributions of socio-demographic characteristics matched the target population distributions of those characteristics. The target population distributions were determined by the Census Bureau’s March 2017 Current Population Survey. Additional information is available in the codebook for UAS 70. These weights were used throughout the analysis.

Results

Summary statistics. Table 1 provides summary statistics for the two main samples used in this analysis. The first set of columns is based on the 558 individuals who had claimed Social Security benefits at the time of the survey. The middle set of columns is based on the 553 individuals who had not yet claimed, and the last set of columns combines both samples.

Not surprisingly, those who had already claimed at the time of the survey tended to be older than those who had not, and they were less likely to be working. Most people had an IRA or 401(k) at some point. A slight majority were male, which may be because the sample was restricted to individuals claiming retired worker benefits, and women are more likely than men to claim spousal or survivor benefits.

Among the 409 individuals who had claimed and stopped working, the mean retirement age was almost 63, and the average difference between claiming age and retirement age was less than one month. However, 22 percent of the sample reported claiming more than two years after retiring. (Table 1 reports the fraction either unemployed or out of the labor force as 66 percent + 5 percent = 71 percent. This figure differs from 409/558 = 73 percent because post-stratification weights were used in calculating the means in the tables.)

Distribution of actual and intended claiming ages. Figure 1 shows the distribution of (a) claiming ages for individuals who had claimed; (b) the distribution of intended claiming ages for individuals who had not yet claimed; (c) the combined distribution of actual and intended claiming ages for all individuals regardless of whether they had claimed; and (d) the distribution of claiming age minus retirement age for individuals who had both claimed and retired. These figures are based on unweighted data.


 

In panels a, b, and c, ages in months are divided by 12 and rounded down to the nearest whole year, and vertical lines indicate ages 65, 67, and 70; full retirement age for all individuals lies between ages 65 and 67. Not surprisingly, claiming ages for individuals who had already claimed tended to be lower than claiming ages for individuals who had not yet claimed, as the latter group was more likely to include those delaying beyond age 62.

The overall claiming age distribution (panel c) is consistent with previous research, such as Munnell and Chen (2015), Behaghel and Blau (2012), and Goda, Ramnath, Shoven, and Slavov (2018), on claiming behavior. Specifically, most individuals had claimed (or intended to claim) at or before full retirement age, with spikes in claiming at both age 62 and full retirement age. Another small group waited (or intended to wait) until age 70.

Panel (d) shows that almost one-quarter of the sample had a difference of zero months between claiming and retirement, and around half claimed within plus or minus two years of retirement.

Relationship between claiming age and demographics. Table 2 presents regressions showing the relationship between actual and intended claiming ages and demographic characteristics. The first column is based on those who had already claimed at the time of the survey. The second column is based on those who had yet to claim, and the third is based on the combined sample. 


 

Results suggest that those with higher education and primary earners were more likely to delay claiming. In the combined sample, older people tended to claim earlier (through around age 77, in the quadratic approximation), consistent with prior research that claiming ages have been increasing in more recent cohorts (Munnell and Chen 2015).

There was no statistically significant relationship between claiming and the financial literacy score, Social Security knowledge score, or scores on the two Social Security questions most closely related to claiming. Moreover, primary earners who were ineligible for file-and-suspend did not appear to claim (or expect to claim) significantly earlier than those who were eligible.

Financing the gap. Table 3 shows that among individuals whose claim occurred more than two years after retirement, the majority relied on employer-sponsored pensions to finance the gap. A significant number drew down on retirement savings or relied on a spouse’s income. Very few took out loans or received help from family and friends.


 

Satisfaction with claiming decision. Table 4 tabulates individuals’ satisfaction with their past claiming decisions. In the full sample, almost 80 percent of people either agreed or strongly agreed that they were satisfied with their claiming decision. Individuals who claimed within six months of reaching full retirement age reported the greatest degree of satisfaction, with more than 90 percent agreeing or strongly agreeing with the statement. This relationship held up in regression analysis (available upon request), which further showed that individuals who claimed more than two years after retirement tended to be more satisfied with their claiming decisions, as were males and widows. 


Reasons for claiming decision. Table 5 tabulates the reasons individuals provided for their claiming decisions. The top panel shows that among those who claimed before full retirement age, the largest number did so because they had stopped working. Other common reasons for claiming early included needing the money (possibly an indicator of liquidity constraints), poor health, and fear of benefit cuts. Receiving advice from family/friends or a financial adviser was relatively uncommon; and receiving advice from a Social Security Administration employee was even less so.


 

As noted earlier, some individuals may be induced to claim early because of a rule preventing the spouse of an individual from claiming a spousal benefit unless the individual has also claimed his or her retirement benefit. (File-and-suspend was never available before full retirement age.) However, very few people indicated that this rule constrained their claiming choice.

A large fraction of those who claimed early reported “other” reasons. Many of the free-form responses for this question indicated stopping work (e.g., they referred to becoming disabled, being tired of working, or being laid off). Some individuals stated that they did not fully understand the gains from delay. Other responses suggested that some individuals who claimed at age 65 mistakenly believed it to be their full retirement age.

The second panel of Table 5 shows that individuals who claimed between full retirement age and six months post full retirement age were most likely to indicate that it “seemed natural” to claim at full retirement age. Other common reasons included stopping work or wanting to avoid a “reduced” benefit.

Compared to the early claimers, those who claimed at full retirement age were more likely to report being advised to do so by a financial adviser, friends or family, or a Social Security Administration employee. They were also more likely to report wanting to invest the money, but less likely to cite health as a motivation for not delaying further, and a similar fraction reported fearing future benefit cuts.

Prior to full retirement age, people who have claimed and continue to work are subject to an earnings test, which effectively forces those who earn more than a certain amount to delay a portion of benefits (and receive the actuarial adjustment for delay). The survey results suggest that around only 8 percent of those who claimed at full retirement age viewed the earnings test as a constraint on their claiming decision.

One possible complication with the results in the first two panels of Table 5 is that individuals who have not yet reached full retirement age but are in the year in which they will do so may have a stronger incentive to claim due to a significantly weaker earnings test during that year. (The income limit is higher and only applies to income earned prior to reaching full retirement age.)

For the questions about claiming rationales shown in Table 5, the survey routing placed these individuals in the same group as others who claimed before full retirement age. Seventeen individuals claimed before reaching full retirement age but in the year of attaining full retirement age. However, none of their free-form text responses made any reference to the weaker earnings test.

The third panel of Table 5 tabulates the reasons for delaying beyond full retirement age; it is based on the sample of respondents who had claimed and did so more than six months after full retirement age. The final panel tabulates the reasons provided for not having claimed yet; it is based on the sample of respondents who had not claimed at the time of the survey but had reached age 62.

Both panels indicate that continued work was a major reason for delay. However, work was less likely to be cited as a reason for delay among those who delayed beyond full retirement age (46.1 percent vs. 64.5 percent). The earnings test likely explains part of this difference. Among the 11 individuals who had reached full retirement age but not claimed yet, only 52.6 percent cited continued work as a reason. Other common reasons for delaying beyond full retirement age included taking advantage of the gains from delay, not needing the money, and good health.

Most of the rationales for early claiming were uncorrelated with demographic characteristics and the gap between claiming and retirement (regression results are available upon request). However, more highly educated and healthier individuals were less likely to cite poor health as a rationale; individuals with an IRA or 401(k) were more likely to cite advice from a financial professional; older cohorts were less likely to cite needing the money and more likely to cite wanting to invest the money; and men were less likely to cite advice from a financial professional or friends/family, or the retirement of a spouse.

Married people were more likely to cite the retirement of a spouse as a motivation for claiming early, and people who claimed more than two years after stopping work were less likely to cite continued work. Financial and Social Security literacy were mostly uncorrelated with rationales for early claiming, though those who believed benefits to be unaffected by start age were more likely to cite poor health as a reason for claiming early, and those with greater Social Security knowledge were more likely to report claiming early because a spouse had stopped working.

Awareness of the gains from delay. Table 6 indicates that most people born in 1943 or later were aware of the rules surrounding delay for their cohort. However, this awareness generally did not influence their claiming decisions.


 

The top panel of Table 6 is based on the sample of individuals who had claimed and were born in 1943 and later; the bottom panel is based on the subset of married primary earners (to whom the survivor benefit rule likely applies). Multinomial logit regressions (available upon request) indicated that individuals who delayed to full retirement age or beyond were more likely to report that the rules influenced their claiming decision compared to those who claimed before full retirement age.

Primary earners and those in good health were more likely to be influenced by the 8 percent annual growth in benefits for delayers. Married secondary earners were more likely to report being aware of but not influenced by the 8 percent annual growth in benefits. There was some evidence that those with more education were more likely to be aware of and influenced by the rules as well.

Implications and Conclusions

This study provided a preliminary overview of the rationales that people give for their Social Security claiming decisions, offering financial planners insights into how individuals think about the Social Security claiming decision so that advice can be offered accordingly.

Several interesting findings emerged from the results that have relevance for financial planners and suggest directions for future research. Financial planners often give clients advice about saving for retirement and obtaining the highest return possible on their savings. However, the timing of Social Security claiming—which appears to be tied to the timing of retirement through social norms—often has even greater financial stakes (Bronshtein, Scott, Shoven, and Slavov 2018).

The survey suggested that common rationales for claiming Social Security before full retirement age included stopping work, liquidity, poor health, and concerns about future benefit cuts due to policy changes. Common rationales for delay included continued work and a desire to take advantage of the gains from delay. Most people were satisfied with their claiming decisions and reported that while they understood the rules surrounding delay, these rules did not influence their claiming decisions.

Another key finding was that people appeared to view claiming at full retirement age as a social norm. Although the earnings test (which forces delay among those who are still working) could potentially explain the spike in claims at full retirement age, only a small fraction of people reported being influenced by the earnings test. Instead, those who claimed at full retirement age were highly likely to indicate that it seemed “natural” to do so, and that they wanted to avoid a “reduced” benefit (even though claiming at full retirement age also results in a reduced benefit relative to claiming at age 70). These responses are consistent with research by Behaghel and Blau (2012), which showed that both claiming and retirement ages tended to cluster around the full retirement age even when that age was changed by policy. Indeed, Meyer and Reichenstein (2012) showed that claiming near full retirement age was never wealth-maximizing for single people. The fact that so many people claim at full retirement age anyway suggests the role of that age as a social norm.

Social norms may also explain why those who claim at full retirement age reported greater satisfaction with their claiming decision than those who claimed at other ages, as well as why those who claimed at full retirement age were more likely to report being encouraged to do so by others.

Another strong social norm appears to be claiming upon retirement, even though the retirement and claiming decisions can in theory be made independently. A large fraction of people claimed very close to retirement and indicated that their claiming decision was strongly linked to their labor supply decision. The earnings test could explain why individuals who have not reached full retirement age do not claim before they retire. However, it does not explain why most people do not delay claiming beyond retirement, or why claiming is strongly tied to stopping work, even after full retirement age when the earnings test no longer binds.

Liquidity constraints could play a role for some, but previous research has shown that around two thirds of people have sufficient assets to delay Social Security for at least two years even if they have stopped working (Goda, Ramnath, Shoven, and Slavov 2018). And the survey results suggested that those with retirement savings accounts were not less likely to cite labor force status as a rationale for their claiming decision. Thus, the link between retirement and claiming seems to go beyond the earnings test or concerns about liquidity.

Although Social Security claiming was strongly associated with stopping work, roughly 25 percent of the sample who had a gap of two or more years between retirement and claiming Social Security benefits used employer-sponsored pensions and other saving to finance the delay.

Endnotes

  1. See the Social Security Administration’s 2018 “Retirement Benefits” (publication No. 05-10035) at ssa.gov/pubs/EN-05-10035.pdf.
  2. The researchers previously fielded a similar survey with a group of individuals who received retiree health benefits through the OneExchange health insurance marketplace (Nyce, Schieber, Shoven, Slavov, and Wise 2015). Although not a nationally representative sample, it provided an opportunity to test and refine the survey questions in this paper. The firm name was OneExchange at the time of the survey, and it was operated by the benefits consulting firm Towers Watson. It is now known as Via Benefits Insurance Services and is operated by Willis Towers Watson.
  3. Due to a glitch in the survey, three individuals who claimed at full retirement age were inadvertently asked why they claimed before full retirement age. Thus, these three individuals do not have valid responses to this question.
  4. Actually, 130 individuals were asked this question, but one individual appeared to have been routed to this question based on providing an incorrect birth year and was excluded.

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Citation

Shoven, John N., Sita Nataraj Slavov, and David A. Wise. 2018. “Understanding Social Security Claiming Decisions Using Survey Evidence.” Journal of Financial Planning 31 (11): 35–47.

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