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Actuarial Nonequivalence in Early and Delayed Social Security Benefit Claims

Author

Listed:
  • James E. Duggan

    (U.S. Department of the Treasury, Office of Economic Policy)

  • Christopher J. Soares

    (U.S. Department of the Treasury, Office of Economic Policy)

Abstract

Age-related adjustments to Social Security benefits are intended to be actuarially equivalent, on average, rendering lifetime benefits invariant to the timing of first receipt. This article analyzes actuarial equivalence with respect to early and delayed Social Security benefit claims using a large sample of current and former retired-worker beneficiaries. We find substantial deviations from actuarial equivalence that have resulted in “actuarial premiums†for males, particularly low-income males, and “actuarial losses†for females who accept benefits early. Gender-neutral actuarial adjustments partially offset the female life expectancy advantage in Social Security. For delayed claims, the 8% credit scheduled in current law is too low for actuarial equivalence. The patterns of actuarial nonequivalence should be considered in analyses of claiming behavior or in simulations of Social Security reform proposals that may affect claiming behavior.

Suggested Citation

  • James E. Duggan & Christopher J. Soares, 2002. "Actuarial Nonequivalence in Early and Delayed Social Security Benefit Claims," Public Finance Review, , vol. 30(3), pages 188-207, May.
    • Handle: RePEc:sae:pubfin:v:30:y:2002:i:3:p:188-207
    DOI: 10.1177/109114210203000302
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    References listed on IDEAS

    as
    1. Coile, Courtney & Diamond, Peter & Gruber, Jonathan & Jousten, Alain, 2002. "Delays in claiming social security benefits," Journal of Public Economics, Elsevier, vol. 84(3), pages 357-385, June.
    2. Alan S. Blinder & Roger H. Gordon & Donald E. Wise, 1980. "Reconsidering the Work Disincentive Effects of Social Security," NBER Working Papers 0562, National Bureau of Economic Research, Inc.
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    Cited by:

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    2. Elizabeth T. Powers & David Neumark, 2003. "The Supplemental Security Income Program and Incentives to Claim Social Security Retirement Early: Empirical Evidence from Matched SIPP and Social Security Administrative Files," Working Papers wp036, University of Michigan, Michigan Retirement Research Center.
    3. Neumark, David & Song, Joanne, 2013. "Do stronger age discrimination laws make Social Security reforms more effective?," Journal of Public Economics, Elsevier, vol. 108(C), pages 1-16.
    4. James E Duggan & Robert Gillingham & John S Greenlees, 2008. "Mortality and Lifetime Income: Evidence from U.S. Social Security Records," IMF Staff Papers, Palgrave Macmillan, vol. 55(4), pages 566-594, December.
    5. Sanders, Lisanne & De Waegenaere, Anja & Nijman, Theo E., 2013. "When can insurers offer products that dominate delayed old-age pension benefit claiming?," Insurance: Mathematics and Economics, Elsevier, vol. 53(1), pages 134-149.
    6. Jeff Dominitz & Angela Hung & Arthur vanSoest, 2007. "Future Beneficiary Expectations of the Returns to Delayed Social Security Benefit Claiming and Choice Behavior," Working Papers wp164, University of Michigan, Michigan Retirement Research Center.
    7. Yunju Nam & Yungsoo Lee & Shawn McMahon & Michael Sherraden, 2016. "New Measures of Economic Security and Development: Savings Goals for Short- and Long-Term Economic Needs," Journal of Consumer Affairs, Wiley Blackwell, vol. 50(3), pages 611-637, November.

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