@article {5669, title = {A Dynamic Model of Retirement and Social Security Reform Expectations: A Solution to the New Early Retirement Puzzle}, number = {2006-134}, year = {2006}, institution = {Michigan Retirement Research Center, University of Michigan}, address = {Ann Arbor, MI}, abstract = {The need for Social Security Reform in the next years is hardly a matter of debate. Therefore, the widespread believe among Americans that Social Security will not be able to pay benefits in the long run at the level that was anticipated, does not come as a surprise. The government acknowledges the situation, and predicts that substantial benefits cuts will be necessary, yet no legislation has been passed to tackle the problem. Researchers, however, have rarely modeled the uncertainty over Social Security reform and benefit levels, and how they affect claiming behavior and retirement. The purpose of this paper is to assess the extent to which these perceptions of future cuts might explain the puzzle of earlier take-up despite bigger penalties to doing so in the presence of increasing longevity. By introducing a small amount of uncertainty (based on self-reported responses to questions regarding expectations over future cuts) of a relatively small cut (compared with what the government reports as necessary to solve the crisis) in a dynamic life-cycle model of retirement, we are able to match the claiming behavior observed in the data, without relying on heterogeneous preferences. Our results support the hypothesis that expectations over future benefits are affecting current behavior. We find that a mis-specified dynamic retirement model would erroneously predict that an increase in the NRA would delay claiming behavior and increase labor supply at older ages. Once the appropriate earnings test incentives are modeled, and we account for the probability of reforms to the system, an increase in the NRA has little effect on claiming behavior, and it can even increase the proportion of individuals claiming before the NRA.}, keywords = {Expectations, Health Conditions and Status, Public Policy, Retirement Planning and Satisfaction, Social Security}, doi = {http://dx.doi.org/10.2139/ssrn.1095253}, author = {Hugo Ben{\'\i}tez-Silva and Debra S. Dwyer and Sanderson, Warren C.} } @article {6826, title = {Delays in Claiming Social Security Benefits}, journal = {Journal of Public Economics}, volume = {84}, year = {2002}, pages = {357-385}, publisher = {84}, abstract = {This paper focuses on Social Security benefit claiming behavior, a take-up decision that has been ignored in the previous literature. Using financial calculations and simulations based on an expected utility maximization model, we show that delaying benefit claim for a period of time after retirement is optimal in a wide variety of cases and that gains from delay may be significant. We find that approximately 10 of men retiring before their 62nd birthday delay claiming for at least one year after eligibility. We estimate hazard and probit models using data from the New Beneficiary Data System to test four cross-sectional predictions. While the data suggest that too few men delay, we find that the pattern of delays by early retirees is generally consistent with the hypotheses generated by our theoretical model.}, keywords = {Retirement Planning and Satisfaction, Social Security}, url = {http://econ-www.mit.edu/faculty/pdiamond/files/claim14.pdf}, author = {Courtney Coile and Diamond, Peter and Gruber, Jonathan and Jousten, Alain} }