Social Security and Retirement Dynamics

Published: 2005
Project ID: UM05-05


This project will explain the relation of specific features of Social Security, such as benefit amounts, the early entitlement age, the normal retirement age and the earnings-test parameters, to the full range of retirement outcomes – continued work on the main job, partial retirement on the main job, partial retirement outside the main job (a bridge job) and full retirement. The project will also estimate the relation of Social Security to the flows among these states. We will consider not only the effect of Social Security on movement from states of greater to lesser work, the probability of either moving from full-time work to partial retirement or directly to full retirement, or from partial retirement to full retirement, but the reverse flows from states of lesser to states of greater work. This econometric analysis will also allow us to understand how Social Security influences the duration spent in each of these states. Although we know the importance of these states (Gustman and Steinmeier, 2000), we do not have any estimates of how Social Security influences the flows among them. Nor do we understand the role of Social Security in buffering the individual against random events. Yet if these relations are not understood, one cannot tell how current and proposed Social Security policies are likely to affect basic labor market activities.