The Retirement and Social Security Benefit Claiming of U.S. Military Retirees
- 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.
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Paper IDWP 2015-336