Academic journal article Social Security Bulletin

An Empirical Study of the Effects of Social Security Reforms on Benefit Claiming Behavior and Receipt Using Public-Use Administrative Microdata

Academic journal article Social Security Bulletin

An Empirical Study of the Effects of Social Security Reforms on Benefit Claiming Behavior and Receipt Using Public-Use Administrative Microdata

Article excerpt

In the past few years, the Social Security Old-Age and Survivors Insurance benefit system in the United States has undergone some of the most significant changes since its inception. In a short period of time, we have seen the implementation of the phased increase in the full retirement age (FRA) with the resulting increase in the penalty for claiming benefits early, the elimination of the earnings test for those above the FRA, and the incremental increase in the delayed retirement credit (DRC) for those claiming benefits after the FRA. Because these changes have taken place only recently, there is relatively little research using household-level data that analyzes the consequences of all these changes. Using the public-use microdata extract from the Master Beneficiary Record, we are able to uncover a number of interesting trends in benefit claiming behavior and level of benefit receipt, which can help us understand how the changes in the system are shaping the retirement benefit claiming behavior of older Americans. We find evidence of substantial effects of the removal of the earnings test and the increase in the FRA, but evidence of very small effects as a result of the increases in the DRC.

Summary and Introduction

In the past few years Social Security's Old-Age and Survivors Insurance (OASI) program has undergone some of the most important changes since its inception. In a short period of time, we have seen three major changes to the system: (1) the implementation of the phased increase in the full retirement age (FRA), with the resulting increase in the penalty for claiming benefits early; (2) the elimination of the earnings test for those above the FRA; and (3) the incremental increase in the delayed retirement credit (DRC) for those claiming benefits after the FRA.

The changes in the FRA and the most recent changes in the DRC are the result of the reforms signed into law by President Reagan in 1983 following the recommendations of the National Commission on Social Security Reform chaired by Alan Greenspan. The removal of the earnings test is a more recent development, which was introduced in the last year of Clinton's presidency and most likely unexpected for the average American.1 There is relatively little research analyzing the consequences of all these changes, mainly because of how recent they are, but also because of the difficulty identifying the likely contribution of these changes to variables of interest such as labor supply and claiming behavior using publicly available household-level data.

In this article we use microdata from public-use extracts from the Master Beneficiary Record (MBR) to uncover a number of interesting trends in benefit claiming behavior and especially novel trends in the level of benefit receipt. The analysis can help us understand how the changes in the system are shaping the retirement behavior of older Americans.

Our analysis finds evidence of significant effects of the removal of the earnings test, with a large and significant short-run effect of abolishing the test on the claiming behavior of older Americans and evidence of a significant and much longer-lived effect on the composition of benefit claimers and their levels of benefits received after age? 65. We also find sizable effects in the levels of benefits received by early claimers, especially men, as a result of the increase in the FRA, but a hardly noticeable effect of the increases in the DRC. The results on claiming behavior are very similar to those discussed in recent articles by Song and Manchester (2007a, 2007b, and 2007c) using the same data but different empirical strategies. As far as we know, we are the first to analyze the trends in benefit receipt during the period from 1994 through 2004 and connect them with the reforms to the system.

Our findings should encourage researchers to use the public-use data provided by the Social Security Administration (SSA). This data source can complement more traditional analyses using household-level data and provide useful benchmarks for researchers modeling retirement behavior using advanced econometric and computational methods of analyses. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.