How Did the Elimination of the Earnings Test Above the Normal Retirement Age Affect Retirement Expectations?

Pierre-Carl Michaud and Arthur vanSoest
Additional contact information
Arthur vanSoest: RAND & Tilburg University
Authors registered in the RePEc Author Service: Arthur van Soest ()

Working Papers from University of Michigan, Michigan Retirement Research Center

Abstract: This study examines the effect of the 2000 repeal of the earnings test above the normal retirement age on retirement expectations of workers aged 51 to 61 - their probabilities to work past age 62 and 65 as well as the age at which they expect to start claiming old age social security benefits. We use administrative records linked to the HRS to create variables that accurately reflect the change in financial incentives. For men, we find results in line with theoretical predictions on the probability to work after age 65. For example, men whose marginal wage rate increased when the earnings test was repealed, showed the largest increase in the probability to work full-time past normal retirement age. For women, we do not find significant results, possibly due to omitting spouse benefits and their interaction with the earnings test. We also do not find significant evidence of effects of the repeal of the earnings test on the probability to work past age 62 or the expected claiming age. On the other hand, for those reaching the normal retirement age, deviations between the age at which Social Security benefits are actually claimed and the previously reported expected age are more negative in 2000 than in 1998, suggesting that the repeal has increased claiming immediately after reaching normal retirement age. Since our calculations show that the tax introduced by the earnings test was small when accounting for actuarial benefit adjustments and differential mortality, our results suggest that although workers form expectations in a way consistent with forward-looking behavior, they misperceive the complicated rules of the earnings test.

Pages: 45 pages
Date: 2006-10
New Economics Papers: this item is included in nep-age and nep-lab
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp135.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp135.pdf [301 Moved Permanently]--> https://mrdrc.isr.umich.edu/publications/Papers/pdf/wp135.pdf)

Related works:
Working Paper: How Did the Elimination of the Earnings Test above the Normal Retirement Age Affect Retirement Expectations? (2007)
Working Paper: How did the Elimination of the Earnings Test above the Normal Retirement Age affect Retirement Expectations? (2007)
Working Paper: How did the Elimination of the Earnings Test above the Normal Retirement Age affect Retirement Expectations? (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mrr:papers:wp135

Access Statistics for this paper

More papers in Working Papers from University of Michigan, Michigan Retirement Research Center P.O. Box 1248, Ann Arbor, MI 48104. Contact information at EDIRC.
Bibliographic data for series maintained by MRRC Administrator ().