The Effect of Social Security Information on the Labor Supply and Savings of Older Americans

Published: 2016


This paper examines how older workers adjust their labor supply in response to information they receive about their retirement wealth from the provision of the Social Security Statement. We find that older male workers’ labor supply is highly responsive to receiving personalized information about future Social Security benefits, leading to a reduction of 119 hours worked per year, on average. However, our estimates point to significant heterogeneity in this response, with workers at the lower end of the hours-worked distribution increasing their labor supply and those at the high end decreasing their labor supply. We argue differences in knowledge about Social Security benefits across the labor supply distribution can explain much of this heterogeneity. We additionally explore the extent to which the information on the Statement may have led some workers to mistakenly reduce their labor supply by too much due to a lack of understanding of the dynamic nature of the Statement’s benefit projections with respect to earnings. Receipt of a second Statement led all but the lowest hour workers to increase their labor supply relative to workers who did not receive a second Statement. This is consistent with workers misunderstanding the information provided as accumulated rather than projected wealth. Our results point to older workers being very responsive to Social Security information, which highlights the need to accurately convey information about both pension wealth and its sensitivity to changes in earnings.

Key Findings

    • Older male workers changed their work behavior strongly after receiving their projected retirement benefit from the Social Security Administration, compared to similar workers who didn’t receive a Social Security statement.
    • Those who were working at or more than 40 hours a week left second jobs and switched to part-time; those working less than 10 hours per week started full-time work.
    • After receiving a second, updated statement, people changed their work behavior toward what it had been before receiving a statement.
    • Women reacted similarly, but less extremely.


Armour, Philip and Michael F. Lovenheim. 2016. "The Effect of Social Security Information on the Labor Supply and Savings of Older Americans." Ann Arbor, MI. University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2016-361.