The Retirement and Social Security Benefit Claiming of U.S. Military Retirees

Published: 2015

Abstract

Theoretically, under alternative exploratory assumptions, the income effect will tend to dominate at higher levels of the military pension, implying that the military retirement benefit increases retirement.
Empirically, the income effect is also the dominant effect; a higher military retirement benefit increases the likelihood of retiring from the labor force among Medicare-eligible military retirees, conditional on still working full time at age 64.
The difference-in-difference estimate is statistically significant and large, implying a 1% increase in the monthly benefit would result in a 5.9% greater likelihood of retirement at ages 65 and older.
Expansion of the military pension is also associated with delayed claiming of Social Security benefits, though our estimates are not statistically significant.
Additional research is needed, preferably using administrative military personnel data merged with Social Security data, permitting larger sample sizes for analysis.
Military retirees are a distinct population in terms of their retirement and claiming behavior.
Consequently, their welfare during retirement, as well as the cost of Social Security benefits, is likely to differ from that of the general population.