Faculty of Economics and Business Administration Publications Database

Will They Take the Money and Work? People’s Willingness to Delay Claiming Social Security Benefits for a Lump Sum

Mitchell, Olivia S.
Rogalla, Ralph
Volume: 85
Number: 4
Pages: 877 - 909
ISSN-Print: 0022-4367
Link External Source: Online Version
Year: 2018
Keywords: Annuity; Delayed retirement; Lifetime income; Pension; Early retirement

This paper investigates whether exchanging Social Security delayed retirement credits, currently paid as increases in lifelong benefits, for a lump sum would induce later claiming and additional work. We show that people would voluntarily claim about six months later if the lump sum were paid for claiming after the Early Retirement Age, and about eight months later if the lump sum were paid only for those claiming after their Full Retirement Age. Overall, people will work one-third to one-half of the additional months. Those who would currently claim at the youngest ages are most responsive to the lump sum offer.