The Effects of Social Security Reforms on Retirement Ages and Retirementincomes

28 Pages Posted: 8 Jul 2004 Last revised: 9 Sep 2022

See all articles by Gary Fields

Gary Fields

Cornell University - School of Industrial and Labor Relations; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

Date Written: May 1984

Abstract

Recent changes legislated in the U.S. Social Security system are changing the economic incentives to work and retire. Some older workers will respond to these new incentives by retiring at different ages. This paper evaluates the signs and magnitudes of these responses. Using a representative sample of male workers, we investigate the pre-reform earnings, private pensions, and Social Security profiles available at alternative retirement ages. Then we examine four specific changes in the structure of Social Security benefits: raising the normal retirement age, delaying the cost-of-living adjustment, lowering early retirement benefits, and increasing late retirement payments. Behavioral parameters are estimated using an ordered logit model of retirement ages; these are than used to evaluate how retirement behavior might respond to each of the four reforms.The largest retirement age response is observed for the policy change which cuts benefits at the earliest ages and offers larger rewards for continued work. This change would delay the average retirement age by about three months. The other reforms generate even smaller responses. Changes in retirement ages of this magnitude will be to small to compensate retirees for reductions in benefit formulas. Thus the Social Security's financial burden will be eased but retiree's incomes will fall on average.

Suggested Citation

Fields, Gary S. and Mitchell, Olivia S., The Effects of Social Security Reforms on Retirement Ages and Retirementincomes (May 1984). NBER Working Paper No. w1348, Available at SSRN: https://ssrn.com/abstract=227152

Gary S. Fields (Contact Author)

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Olivia S. Mitchell

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