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Exchanging Delayed Social Security Benefits For Lump Sums: Could This Incentivize Longer Work Careers?

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Listed:
  • Jingjing Chai

    (Goethe University)

  • Raimond Maurer

    (Goethe University)

  • Olivia Mitchell

    (Wharton School of Business)

  • Ralph Rogalla

    (Goethe University)

Abstract

Social Security benefits are currently provided as a lifelong benefit stream, though some workers would be willing to trade a portion of their annuity streams in exchange for a lump sum amount. This paper explores whether allowing people to receive a lump sum as a payment for delayed retirement rather than as an addition to their lifetime Social Security benefits might induce them to work longer. We model the factors that influence how people trade off a Social Security stream for a lump sum, and we also examine the consequences of such tradeoffs for work, retirement, and life cycle wellbeing. Our base case indicates that workers given the chance to receive their delayed retirement credit as a lump sum payment would boost their average retirement age by 1.5-2 years. This will interest policymakers seeking to reform the Social Security system without raising costs or cutting benefits, while enhancing the incentives to delay retirement.

Suggested Citation

  • Jingjing Chai & Raimond Maurer & Olivia Mitchell & Ralph Rogalla, 2013. "Exchanging Delayed Social Security Benefits For Lump Sums: Could This Incentivize Longer Work Careers?," Discussion Papers 13-009, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:13-009
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    Cited by:

    1. Raimond Maurer & Olivia S. Mitchell & Ralph Rogalla & Tatjana Schimetschek, 2021. "Optimal social security claiming behavior under lump sum incentives: Theory and evidence," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(1), pages 5-27, March.
    2. Raimond Maurer & Olivia S. Mitchell & Ralph Rogalla & Tatjana Schimetschek, 2014. "Will They Take the Money and Work? An Empirical Analysis of People's Willingness to Delay Claiming Social Security Benefits for a Lump Sum," NBER Working Papers 20614, National Bureau of Economic Research, Inc.
    3. Maurer, Raimond & Mitchell, Olivia S., 2021. "Older peoples' willingness to delay social security claiming," Journal of Pension Economics and Finance, Cambridge University Press, vol. 20(3), pages 410-425, July.
    4. Goda, Gopi Shah & Ramnath, Shanthi & Shoven, John B. & Slavov, Sita Nataraj, 2018. "The financial feasibility of delaying Social Security: evidence from administrative tax data," Journal of Pension Economics and Finance, Cambridge University Press, vol. 17(4), pages 419-436, October.
    5. Maurer, Raimond & Mitchell, Olivia S., 2017. "Incentivizing older people to delay social security claiming," SAFE Policy Letters 57, Leibniz Institute for Financial Research SAFE.

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D6 - Microeconomics - - Welfare Economics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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