Accounting for Social Security Claiming Behavior

CRR WP No. 2018-8

41 Pages Posted: 5 Oct 2018 Last revised: 25 Nov 2019

See all articles by Svetlana Pashchenko

Svetlana Pashchenko

University of Georgia

Ponpoje Porapakkarm

National Graduate Institute for Policy Studies (GRIPS, Tokyo)

Date Written: September 1, 2018


Why do most individuals claim Social Security benefits before the full retirement age? Claiming benefits early results in a substantial reduction in pension income, yet many people claim as early as possible (age 62) or soon thereafter. We argue that by answering this question, we can make two additional contributions to the literature. First, early claiming is equivalent to low demand for Social Security annuity, thus it offers a unique context for studying the well-known annuity puzzle. Since participation in Social Security is nearly universal, the low demand for this annuity cannot be explained away by market failures. Second, we show that claiming decisions are closely linked to the subjective rate of time preferences and thus can provide a new angle for the identification of this parameter. We provide a quantitative analysis of claiming decisions using a rich structural life-cycle model that matches many important features of the data. We find that the claiming puzzle can be attributed to a combination of three factors: (i) the discrepancy between individuals' subjective valuation of Social Security annuity and its implicit price, (ii) strong bequest motives, (iii) pre-annuitized wealth. We show that if individuals were rewarded for delaying claiming not with additional annuity income but with equivalent (in present value terms) lump-sum payments, the fraction of early claimers would be significantly reduced. effective in inducing individuals to delay claiming.

Suggested Citation

Pashchenko, Svetlana and Porapakkarm, Ponpoje, Accounting for Social Security Claiming Behavior (September 1, 2018). CRR WP No. 2018-8, Available at SSRN:

Svetlana Pashchenko

University of Georgia ( email )

Athens, GA 30602-6254
United States

Ponpoje Porapakkarm (Contact Author)

National Graduate Institute for Policy Studies (GRIPS, Tokyo) ( email )

7-22-1 Roppongi, Minato-Ku
Tokyo 106-8677, Tokyo 106-8677
+818095248741 (Phone)

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