Selected Research & Analysis: Work and Retirement

Employment at Older Ages and Social Security Benefit Claiming
from Social Security Bulletin, Vol. 76, No. 4 (released November 2016)
by Patrick J. Purcell

Eligible workers can claim Social Security retirement benefits at age 62, the earliest eligibility age; however, those who claim benefits before attaining full retirement age receive permanently reduced benefits. Working longer and claiming benefits later can result in higher Social Security benefits and greater financial security in retirement. This article presents data on trends in the labor force participation rate of older Americans and the age at which people claim Social Security retired-worker benefits.

A Multidisciplinary Review of Research on the Distributional Effects of Raising Social Security's Early Entitlement Age
ORES Working Paper No. 112 (released October 2015)
by Hilary Waldron

When estimating potential adversity caused by an increase in the early entitlement age (EEA), findings from both the EEA literature and the broader public health literature do not suggest that the Social Security–covered worker population can be easily separated into two groups—an unaffected or low-risk group and an easily identifiable vulnerable or high-risk group. This evidence appears largely supportive of the conclusions reached by the retired-worker benefit's original designers and may suggest implementation difficulties for proposals that seek to raise the EEA, while protecting groups deemed by the proposers to be adversely affected by that increase. Because the risks insured against by the retired-worker benefit are not limited to an easily identifiable segment of the population, the universality of Old-Age Insurance under current law may better match the underlying exposure to risk in the insured population than a targeted or needs-based alternative.

Incentivizing Delayed Claiming of Social Security Retirement Benefits Before Reaching the Full Retirement Age
from Social Security Bulletin, Vol. 74, No. 4 (released November 2014)
by Melissa A. Z. Knoll and Anya Olsen

Claiming Social Security retirement benefits before the full retirement age (FRA) results in permanently lower benefits, while delaying claiming permanently increases benefits. This article uses Modeling Income in the Near Term data to determine the socioeconomic characteristics of individuals who claim at various ages. The authors then describe a number of novel approaches aimed at encouraging individuals to delay claiming in the months and years before reaching their FRA. Lastly, the authors model one of those approaches to examine how a 1-year delay in claiming affects benefits and poverty in the future.

How Do Trends in Women's Labor Force Activity and Marriage Patterns Affect Social Security Replacement Rates?
from Social Security Bulletin, Vol. 73, No. 4 (released November 2013)
by April Yanyuan Wu, Nadia S. Karamcheva, Alicia H. Munnell, and Patrick J. Purcell

Changes in the role of women in the economy and in the family have affected both the amount and the type of Social Security benefits they receive in retirement. Women's labor force participation rate increased from less than 40 percent in 1950 to more than 70 percent in 2011. Over much of the same period, marriage rates fell and divorce rates rose. This article examines how women's higher earnings and lower marriage rates have affected Social Security replacement rates over time for individuals and for households.

Modeling Behavioral Responses to Eliminating the Retirement Earnings Test
from Social Security Bulletin, Vol. 73, No. 1 (released February 2013)
by Anya Olsen and Kathleen Romig

The retirement earnings test (RET) is an often-misunderstood aspect of the Social Security program. Policymakers have proposed reforming the RET as a way to encourage working at older ages. However, this could also cause earlier benefit claiming. We use Modeling Income in the Near Term data to analyze the complete repeal of the earnings test for beneficiaries aged 60 or older, first assuming no behavioral responses to repeal and secondly assuming changes to benefit claiming and workforce participation behaviors. Our lifetime results show that the assumed behavioral response—particularly the benefit claiming change—has a bigger effect than the RET policy change itself.

How Did the Recession of 2007–2009 Affect the Wealth and Retirement of the Near Retirement Age Population in the Health and Retirement Study?
from Social Security Bulletin, Vol. 72, No. 4 (released November 2012)
by Alan L. Gustman, Thomas L. Steinmeier, and Nahid Tabatabai

This article uses household wealth and labor market data from the Health and Retirement Study (HRS) to investigate how the recent "Great Recession" has affected the wealth and retirement of the Early Boomer cohort, those in the population who were just approaching retirement age at the beginning of the recession. The retirement wealth of people aged 53–58 before the onset of the recession in 2006 declined by a relatively modest 2.8 percent by 2010. For members of older cohorts, wealth had increased by about 5 percent over a comparable age span. The wealth holdings of poorer households were least affected by the recession. Relative losses were greatest for those who initially had the highest wealth when the recession began. The retirement behavior of the Early Boomer cohort looks similar, at least to date, to the behavior observed for members of older cohorts at comparable ages.

The Increasing Labor Force Participation of Older Workers and its Effect on the Income of the Aged
from Social Security Bulletin, Vol. 72, No. 1 (released February 2012)
by Michael V. Leonesio, Benjamin Bridges, Robert V. Gesumaria, and Linda Del Bene

Higher labor force participation rates for people aged 62–79 are associated with a dramatic increase in the share of their total money income attributable to earnings. For persons aged 65–69, the earnings share increased from 28 percent in 1980 to 42 percent in 2009. Two decades ago, Social Security benefits and earnings were roughly equal shares of total money income (about 30 percent); the earnings share is now more than 12 percentage points larger. The marked increase in the importance of earnings as an income source is also evident throughout the 62–79 age range among Social Security beneficiaries.

Behavioral and Psychological Aspects of the Retirement Decision
from Social Security Bulletin, Vol. 71, No. 4 (released November 2011)
by Melissa A. Z. Knoll

The majority of research dealing with the retirement decision has focused on the health and wealth aspects of retirement. Research in the areas of judgment and decision making and behavioral economics suggests that there may be a number of behavioral factors that influence the retirement decision as well. This review highlights such factors and offers a unique perspective on potential determinants of retirement behavior, including anchoring and framing effects, affective forecasting, hyperbolic discounting, and the planning fallacy. The author describes findings from previous research, as well as draws novel connections between existing decision-making research and the retirement decision.

Retiring in Debt? Differences between the 1995 and 2004 Near-Retiree Cohorts
from Social Security Bulletin, Vol. 69, No. 2 (released July 2009)
by Chris E. Anguelov and Christopher R. Tamborini

This article uses the U.S. Federal Reserve Board's Survey of Consumer Finances to examine near retirees' (aged 50 to 61) debt holdings in 1995 and 2004. Employing a variety of measures on household borrowing, our results show that near retirees in 2004—the leading edge of the baby-boom cohort—had more consumer and housing debt than their counterparts in 1995. We observe a modest increase in the median debt service and debt-to-assets ratios between the two cohorts, but no statistical difference in their respective average. Analysis of several demographic and socioeconomic subgroups reveals certain population segments, such as single female households, with significantly higher debt service ratios in 2004.

Social Security and Marginal Returns to Work Near Retirement
Issue Paper No. 2009-02 (released April 2009)
by Gayle L. Reznik, David A. Weaver, and Andrew G. Biggs

Using the Social Security Administration's MINT (Modeling Income in the Near Term) model, this paper calculates the marginal returns to work near retirement, as measured by the increase in benefits associated with an additional year of employment at the end of an individual's work life. With exceptions for certain population subgroups, the analysis finds that marginal returns on Social Security taxes paid near retirement are generally low. The paper also tests the effects on marginal returns of a variety of potential Social Security policy changes designed to improve incentives to work.

An Overview of the Railroad Retirement Program
from Social Security Bulletin, Vol. 68, No. 2 (released October 2008)
by Kevin Whitman

The Railroad Retirement program was established in the 1930s. It provides retirement, survivor, unemployment, and sickness benefits to individuals who have spent a substantial portion of their career in railroad employment, as well as to these workers' families. This article describes the history, benefit structure, and funding of the Railroad Retirement program.

Trends in Mortality Differentials and Life Expectancy for Male Social Security-Covered Workers, by Socioeconomic Status
from Social Security Bulletin, Vol. 67, No. 3 (released April 2008)
by Hilary Waldron

This article presents an analysis of trends in mortality differentials and life expectancy by socioeconomic status for male Social Security-covered workers aged 60 or older. Mortality differentials, cohort life expectancies, and period life expectancies by average relative earnings are estimated. Period life expectancy estimates for the United States are also compared with those of other Organisation for Economic Co-operation and Development (OECD) countries.

Have People Delayed Claiming Retirement Benefits? Responses to Changes in Social Security Rules
from Social Security Bulletin, Vol. 67, No. 2 (released February 2008)
by Jae G. Song and Joyce Manchester

Using a 1 percent sample of Social Security Administration data, this article documents and analyzes responses in the entitlement age for old-age benefits following the recent changes in Social Security rules. Both rules, the removal of the retirement earnings test (RET) for persons who are at the full retirement age (FRA) through age 69 in 2000 or later and a gradual increase in the FRA for those who reach age 62 in 2000 or later, are expected to affect the age at which people claim Social Security retirement benefits (or entitlement age) and the work behavior of older Americans.

New Evidence on Earnings and Benefit Claims Following Changes in the Retirement Earnings Test in 2000
ORES Working Paper No. 107 (released June 2006)
by Jae G. Song and Joyce Manchester

In April 2000, Congress enacted the Senior Citizens Freedom to Work Act of 2000, which removed the retirement earnings test for individuals at the full retirement age and older. This paper examines the labor force activity of workers aged 65–69 relative to older and younger workers in response to the removal of the earnings test. We use the 1 percent sample of Social Security administrative data that covers the period from 4 years before to 4 years following the removal of the test. Quantile regression methods allow us to identify the earnings levels of workers who change their work effort.

Defined Contribution Pension Plans and the Supplemental Security Income Program
Policy Brief No. 2006-01 (released March 2006)
by Rene Parent

This policy brief analyzes changes in the employer-sponsored pension system and the relationship of these changes to the Supplemental Security Income program's treatment of retirement plans. SSI does not treat assets in defined benefit and defined contribution retirement plans in the same manner. The primary difference is that a potential SSI recipient has access to the funds in a defined contribution plan, but a participant in the defined benefit plan has no access to the pension until attaining a specific age. The increasing prevalence of the defined contribution retirement plan and the decreasing prevalence of the defined benefit plan is one significant change—a trend that has gained momentum since the mid-1980s. The importance of these issues relates to the extent of pension plan holdings among SSI applicants and recipients, which is in turn directly related to their involvement in the labor force. The policy brief discusses three alternate approaches to SSI treatment of defined contribution retirement plans, one of which is to retain the current policy.

Evaluating the Initial Impact of Eliminating the Retirement Earnings Test
from Social Security Bulletin, Vol. 65, No. 1 (released May 2004)
by Jae G. Song

How did workers aged 65–69 respond to the removal of the retirement earnings test in 2000? Using Social Security administrative data matched with data from the Survey of Income and Program Participation, the author finds that the higher earners in this group increased their earnings, while the lower earners did not. The author reports an acceleration of benefit applications by workers aged 65–69 but no clear evidence of increased employment in this age group.

The Economics of Retirement: A Nontechnical Guide
ORES Working Paper No. 66 (released April 1995)
by Michael V. Leonesio

This paper provides a nontechnical explanation of the basic ideas that underpin economists' thinking about work and retirement decisions and discusses and elaborates on the basic economic model of retirement. The paper begins with a simple economic model of an individual's work decision, to explain the construction and logic of this model, and to show how the model can be used to make basic predictions about factors that might plausibly affect the timing of retirement. From this starting point—which essentially describes the economic retirement models before the late 1970s—the paper then explains how the model has been extended during the past 2 decades. The increasing sophistication and complexity of the models reflect scientific progress in which new retirement research incorporates the findings of previous efforts, the desire to incorporate more realism into the models, and the availability of improved data. The progress in economic modeling is emphasized as the contributions of various influential studies are reviewed.

The Work and Retirement Decisions of Older Women: A Literature Review
ORES Working Paper No. 61 (released May 1994)
by David A. Weaver

This paper reviews the economic literature on the work and retirement decisions of older women. Economic studies generally find that married women respond to the financial reward for work (for example, wages) in making their work and retirement decisions, but that they do not respond to unearned income and wealth (for example, the value of lifetime Social Security benefits). Unmarried women are found to respond to all type of financial variables. Most economic studies find that the family plays only a limited role in the work and retirement decisions of women. The retirement status of the husband does influence the wife's retirement decision, but the health status of the husband does not. The presence of dependents in the household, regardless of whether they are children or parents, is not found to influence work and retirement among women. The relevance of these results to Social Security policy is discussed.

There are a number of reasons to be cautious about the results. The literature to date is small; it is based on data that are deficient in some respects, and it contains studies that have methodological problems. These problems are discussed and prospects for future research are explored.

Social Security and Older Workers
ORES Working Paper No. 53 (released December 1991)
by Michael V. Leonesio

Many observers have noted that the long-term decline in labor force participation by older Americans may reflect the evolution of social institutions that effectively discourage work. Often-cited factors include employer discrimination against older workers, private pension plans that penalize continued employment, and the Social Security system. Various policies, such as eliminating Social Security's retirement test, have been proposed with a view to eliminating or lessening employment barriers.

This paper summarizes the economic evidence that addresses the role played by the Old-Age and Survivors Insurance (OASI) programs in retirement decisions. OASI is shown to have statistically significant effects on both the timing of retirement and the amount of post-retirement work; however, the influence is not large relative to the many other factors that determine the labor-supply decisions of older workers. Consequently, changes in Social Security policy of the type and magnitude that are politically feasible are unlikely to result in large changes in retirement behavior.

Simulating Aggregate and Distributional Effects of Various Plans for Modifying the Retirement Earnings Test
ORES Working Paper No. 46 (released July 1990)
by David Pattison, Benjamin Bridges, Michael V. Leonesio, and Bernard Wixon

Social Security's retirement test continues to receive considerable attention among policymakers. During the past several years a variety of proposals have been advanced that would modify or eliminate the test for persons aged 65–69. In January 1989, we completed a study report, prepared for SSA internal use, that examined several of these proposals, analyzing their effect on earnings, taxes, and benefits in the first year of implementation, assumed to be 1990. The analysis included both aggregate estimates and estimates for selected population subgroups.

Although the specific proposals for modifying the retirement test have changed somewhat during the past 2 years, continued congressional interest has prompted the release of this initial version of our research for public discussion. Because we are in the process of revising the report for final publication, readers are cautioned that numbers and interpretations contained in this paper are subject to change.

A Review of the Net Revenue Estimates in Robbins and Robbins, "Paying People Not to Work"
ORES Working Paper No. 41 (released January 1990)
by David Pattison

This note discusses the net revenue estimates in the report "Paying People Not to Work: the Economic Cost of the Social Security Retirement Earnings Limit," by Aldona Robbins and Gary Robbins.

Physically Demanding Occupations, Health, and Work After Retirement: Findings From the New Beneficiary Survey
from Social Security Bulletin, Vol. 51, No. 11 (released November 1988)
by Karen C. Holden
Jobs of Persons Working After Receiving Retired-Worker Benefits
from Social Security Bulletin, Vol. 50, No. 11 (released November 1987)
by Howard M. Iams
Employment of Retired-Worker Women
from Social Security Bulletin, Vol. 49, No. 3 (released March 1986)
by Howard M. Iams
Characteristics of the Longest Job for New Retired Workers: Findings From the New Beneficiary Survey
from Social Security Bulletin, Vol. 48, No. 3 (released March 1985)
by Howard M. Iams
Social Security and the Labor Supply of Aged Men: Evidence From the U.S. Time Series
ORES Working Paper No. 21 (released December 1980)
by Louis Esposito and Michael D. Packard

The purpose of this paper is to investigate the effect of the social security system on the labor supply of aged men using U.S. time series data for the period 1947 to 1975. The specific phenomena to be explained is the dramatic decrease in the labor supply of aged men during this period. Between 1947 and 1975, the annual labor force participation rate of men 65 and over decreased from 47.8 percent to 21.7 percent—a decrease of 55 percent. In terms of annual hours worked per capita for men 65 and over, there was a decrease from about 880 hours to 312 hours during this period—a decrease of 65 percent. The specific focus of the analysis will be on the relative importance of social security in explaining this decrease in labor supply.

Subjective Retirement
from Social Security Bulletin, Vol. 42, No. 11 (released November 1979)
by Janet H. Murray
Retirement History Study's First Four Years: Work, Health, and Living Arrangements
from Social Security Bulletin, Vol. 39, No. 12 (released December 1976)
by Kathleen Bond
Work Status and Income Change, 1968–72: Retirement History Study Preview
from Social Security Bulletin, Vol. 39, No. 12 (released December 1976)
by Alan Fox
Women's Worklives and Future Social Security Benefits
from Social Security Bulletin, Vol. 39, No. 4 (released April 1976)
by Lucy B. Mallan
Work After Retirement: Some Psychological Factors
from Social Security Bulletin, Vol. 38, No. 7 (released July 1975)
by George L. Maddox and Gerda G. Fillenbaum
Work After Retirement
from Social Security Bulletin, Vol. 36, No. 9 (released September 1973)
by Gerda G. Fillenbaum and George L. Maddox
The Elderly Aid The Elderly: The Senior Friends Program
from Social Security Bulletin, Vol. 35, No. 11 (released November 1972)
by Naomi Breslau and Marie R. Haug
Work Experience of Men Claiming Retirement Benefits, 1966
from Social Security Bulletin, Vol. 32, No. 8 (released August 1969)
by Lenore E. Bixby and E. Eleanor Rings
Old-Age, Survivors, and Disability Insurance: Earnings of Older Workers and Retired-Workers Beneficiaries
from Social Security Bulletin, Vol. 28, No. 5 (released May 1965)
by Marie C. Trafton
Why Do Beneficiaries Retire? Who Among Them Return to Work?
from Social Security Bulletin, Vol. 18, No. 5 (released May 1955)
by Margaret L. Stecker
Duration of Employment and Mobility of Workers: Industry Variations, 1947
from Social Security Bulletin, Vol. 14, No. 1 (released January 1951)
by Harper R. Fortune
Beneficiaries Prefer to Work
from Social Security Bulletin, Vol. 14, No. 1 (released January 1951)
by Margaret L. Stecker
Why Beneficiaries Returned to Work
from Social Security Bulletin, Vol. 8, No. 4 (released April 1945)
by Edna C. Wentworth