The Financial Feasibility of Delaying Social Security: Evidence from Administrative Tax Data

30 Pages Posted: 14 Sep 2015

See all articles by Gopi Shah Goda

Gopi Shah Goda

Stanford University

Shanthi Ramnath

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

John B. Shoven

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Sita Slavov

George Mason University - School of Policy, Government, and International Affairs

Date Written: September 2015

Abstract

Despite the large and growing returns to deferring Social Security benefits, most individuals claim Social Security before the full retirement age, currently age 66. In this paper, we use a panel of administrative tax data on likely primary earners to explore some potential hypotheses of why individuals fail to delay claiming Social Security, including liquidity constraints and private information regarding one’s expected future lifetime. We find that approximately 31-34% of beneficiaries who claim prior to the full retirement age have assets in Individual Retirement Accounts (IRAs) that would fund at least 2 additional years of Social Security benefits, and 24-26% could fund at least 4 years of Social Security deferral with IRA assets alone. Our analysis suggests that these percentages would be considerably higher if other assets were taken into account. We find evidence that those who claim prior to the full retirement age have higher subjective and actual mortality rates than those who claim later, suggesting that private information about expected future lifetimes may influence claiming behavior.

Suggested Citation

Goda, Gopi Shah and Ramnath, Shanthi and Shoven, John B. and Slavov, Sita, The Financial Feasibility of Delaying Social Security: Evidence from Administrative Tax Data (September 2015). NBER Working Paper No. w21544. Available at SSRN: https://ssrn.com/abstract=2660003

Gopi Shah Goda (Contact Author)

Stanford University ( email )

SIEPR
366 Galvez St.
Stanford, CA 94305
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6507360480 (Phone)

Shanthi Ramnath

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

John B. Shoven

Stanford University - Department of Economics ( email )

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United States
650-326-5377 (Phone)
650-328-4163 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Sita Slavov

George Mason University - School of Policy, Government, and International Affairs ( email )

Founders Hall
3351 Fairfax Dr.
Arlington, VA 22201
United States

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