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Will They Take the Money and Work? An Empirical Analysis of People’s Willingness to Delay Claiming Social Security Benefits for a Lump Sum

Journal of Risk and Insurance, Vol. 85, Issue 4, pp. 877-909

Authors:
Raimond Maurer,
Olivia S. Mitchell,
Ralph Rogalla,
Tatjana Schimetschek
Research Area:
Household Finance
Date:
Dec 2018
Keywords:
Annuity, lump sum, Social Security, delayed retirement, lifetime income, pension
Abstract:

This article investigates whether exchanging Social Security delayed retirement credits, currently paid as increases in lifelong benefits, for a lump sum would induce later claiming and additional work. We show that people would voluntarily claim about 6 months later if the lump sum were paid for claiming after the early retirement age, and about 8 months later if the lump sum were paid only for those claiming after their full retirement age. Overall, people will work one-third to one-half of the additional months. Those who would currently claim at the youngest ages are most responsive to the lump sum offer.

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