2019 RDRC Meeting: The Effect of the Delayed Retirement Credit on Social Security Claiming and Employmen

Published: 2019


In this project, we investigate the effect of changes in the delayed retirement credit (DRC) on workers’ decisions to claim retired-worker benefits. The DRC gives workers a financial incentive to delay claiming beyond their full retirement age (FRA). The 1983 Social Security Amendments gradually increased the DRC from 3% annually (or 0.25% per month) for those born in 1924 or earlier to 8% annually (or 0.67% per month) for those born in 1943 or later. This substantially increased workers’ incentives to claim benefits after reaching their FRA. Focusing on those born in 1937 or earlier (and thus who were unaffected by the contemporaneous amendment-induced changes to the FRA), our findings demonstrate that there is very little change in the age at which individuals claim Social Security retired-worker benefits. For example, there is virtually no change in the share of workers claiming beyond FRA (which remains at less than 5%) for those with a 6.5% DRC (born in 1937) versus those with a 3% DRC (born in 1924). Since for many the more than doubling of the DRC would have shifted the age at which the present value of benefits are maximized to beyond the FRA, our results strongly suggest that workers do not focus on the present value of benefits when deciding when to claim. In ongoing work, we are using micro-level SSA data to investigate whether there have been differential responses to the DRC changes that are not captured by analyses using aggregate SSA data.

Key Findings