Social Security Claiming: Trends and Business Cycle Effects

Abstract

This study examines Social Security claiming behavior, which has important implications for older Americans and for the system itself. Retirees may begin collecting benefits as early as age 62, but early claimants receive lower monthly benefits for the rest of their lives. Our data come from Survey of Income and Program Participation (SIPP) files from 1984 to 2009 linked to administrative records on earnings and benefits. The sample is restricted to respondents with 40 quarters of covered employment who did not claim benefits before age 62. Results indicate that early claiming has declined over the past decade, after increasing over the previous 10 years. For men, the share claiming at age 62 fell from 55.3 percent in the 1930-34 birth cohort to 46.4 percent in the 1940-44 cohort. Over the same period, the share of women claiming at 62 fell from 59.3 to 49.0 percent. The recent trend toward delayed claiming is evident among all educational groups, not just college graduates. Hazard models show that high unemployment boosts Social Security claiming among men with limited education. A 1 percentage point increase in the state unemployment rate is associated with a 0.4 percentage point increase in the likelihood each month that men who never attended college will claim benefits, a relative increase of 6 percent. This estimate implies that the Great Recession increased claiming for men with limited education by about 40 percent. Claiming behavior among women and well-educated men is not significantly correlated with the state unemployment rate, however.

Keywords: social security, claiming, retirement, unemployment, great recession

JEL Classification: J26, H55