Early Claiming of Social Security Benets and Labor Supply Behavior of Older Americans

The labor supply incentives provided by the early retirement rules of the United States Social Security Old Age benets program are of growing importance as the Normal Retirement Age (NRA) increases to 67, and the labor force participation of Older Americans starts to increase. These incentives allow individuals who claim benets before the NRA but continue to work, or return to the labor force, to increase their future rate of benet pay by having benets withheld. Since the adjustment of the benet rate takes place only after the NRA is reached, benets received before the NRA can become actuarially unfair for those who continue to work after claiming. Consistent with these incentives, estimates, using a bivariate hazard model of the monthly exit and claiming hazard using data from the Health and Retirement Study indicate that early claimers who continue to work are likely to exit the labor force later than non-claimers. Moreover, early claimers who re-enter the labor force are likely to have longer employment spells than non-claimers who return to the labor force