Optimal Social Security Claiming Behavior under Lump Sum Incentives: Theory and Evidence
by Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, Tatjana Schimetschek
Abstract:
People who delay claiming Social Security receive higher lifelong benefits upon retirement. We survey individuals on their willingness to delay claiming later, if they could receive a lump sum in lieu of a higher annuity payment. Using a moment-matching approach, we calibrate a lifecycle model tracking observed claiming patterns under current rules and predict optimal claiming outcomes under the lump sum approach. Our model correctly predicts that early claimers under current rules would delay claiming most when offered actuarially fair lump sums, and for lump sums worth 87% as much, claiming ages would still be higher than at present.
http://papers.nber.org/papers/w23073?utm_campaign=ntw&utm_medium=email&utm_source=ntw
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1 comment:
Does it talk about the impact of adverse selection or the financial incentive to burn down outside savings?
They are changing the gaming point of the decision from something that you don't know to something that you very well may. Today to make money on deferring benefits you have to outlive a normal life time. In their environment, they offer a reward to someone with a shorter life expectancy.
There is no incentive to work longer. People will continue to retire, and use outside savings to bridge the gap. They have a marvelous idea of welfare for the rich. Andrew these people need to understand that is no $0.50 solutions.
The longer version is here:
http://thehill.com/blogs/congress-blog/economy-budget/284157-fixing-social-security-with-the-funhouse-mirror
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