Leaving big money on the table: Arbitrage opportunities in delaying social security

Gila Bronshtein, Jason Scott, John B. Shoven and Sita Slavov

The Quarterly Review of Economics and Finance, 2020, vol. 78, issue C, 261-272

Abstract: Even though delaying Social Security is equivalent to purchasing a very favorably priced annuity, almost everyone takes Social Security at or before their full retirement age. Many who take Social Security early simultaneously report additional annuity income. This combination can create an arbitrage opportunity where an individual could explicitly or implicitly sell their relatively high priced annuity, use the proceeds to delay Social Security and secure higher income for life. Several hundred thousand, perhaps millions, of households fail to take advantage of this arbitrage opportunity, with a resulting loss that ranges up to $250,000.

Keywords: Pensions; Annuities; Retirement; Social Security; Arbitrage (search for similar items in EconPapers)
Date: 2020
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Working Paper: Leaving Big Money on the Table: Arbitrage Opportunities in Delaying Social Security (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:78:y:2020:i:c:p:261-272

DOI: 10.1016/j.qref.2020.03.006

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