How Do Subjective Mortality Beliefs Affect the Value of Social Security and the Optimal Claiming Age

TitleHow Do Subjective Mortality Beliefs Affect the Value of Social Security and the Optimal Claiming Age
Publication TypeReport
Year of Publication2011
AuthorsSun, W, Webb, A
Series TitleCenter for Retirement Research at Boston College Working Papers
Document NumberWP#2011-22
InstitutionCenter for Retirement Research at Boston College
CityBoston, MA
KeywordsExpectations, Health Conditions and Status, Public Policy, Retirement Planning and Satisfaction, Social Security

Households that delay claiming Social Security are, in effect, making additional purchases of the Social Security annuity. Theoretical calculations show the delayed claiming is optimal, even for high mortality households. Yet most claim well before the theoretically optimal age. This paper investigates whether subjective mortality beliefs contribute to the prevalence of early claiming. The value of delay depends not only on life expectancy, but also on the degree of uncertainty surrounding the age of death. Using data from the Health and Retirement Study, we show that women approaching retirement understate their probabilities of surviving to age 75 by an average of 10 percentage points, whereas men's forecasts are, on average, correct. But both men and women exhibit greater confidence in their ability to forecast their age of death, relative to the predictions of life tables. But these subjective mortality beliefs have little effect on the value of Social Security or the optimal claim age, and cannot explain the prevalence of early claiming. We also find that self-assessed survival probabilities do not predict survival after controlling for health and socio-economic status, indicating a potential for medical underwriting to reduce adverse selection in the annuity market.


Copyright - Copyright Social Science Research Network Dec 2011 Language of summary - English ProQuest ID - 913272676 Last updated - 2012-01-02 Place of publication - Rochester Corporate institution author - Sun, Wei; Webb, Anthony DOI - 2551228411; 66534181; 79688; 10.2139/ssrn.1970312; 1970312

Endnote Keywords

Mortality/social security/public policy/subjective mortality beliefs/early claiming

Endnote ID


Citation Key5921