Is the Adjustment of Social Security Benefits Actuarially Fair, and If So, for Whom

• In Event: The Impacts of Public Pension Programs

Abstract

Disparities in Social Security claim ages have risen since the early 1990s. With high earners increasingly likely to delay claiming, and also living longer on average than lower earners, late claimants differ in critical ways from early claimants. Focusing on men, we find that late claimants have lower mortality than those who claim at age 62. As a result of this adverse selection in claiming, combined with increased actuarial adjustments, the return to delaying claiming has become systematically positive for those who actually delay, but not for those who claim early. We further find that selective claiming increases benefits by more for those with higher lifetime earnings because their return to delay exceeds actuarially fair amounts by larger margins. Lastly, we find that selective claiming has a modest effect on total benefit payouts, but a more consequential effect on inequality in lifetime benefit payouts.

Authors

• Irena Dushi, SSA

• Leora Friedberg, lf6s@virginia.edu

• anthony webb