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

Authors

Key Findings

  • 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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Project

Paper ID

WP 2015-336

Publication Type

Research Brief

Publication Year

2015