Exchanging Delayed Social Security Benefits For Lump Sums: Could This Incentivize Longer Work Careers?

Jingjing Chai (), Raimond Maurer, Olivia Mitchell and Ralph Rogalla ()
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Jingjing Chai: Goethe University
Raimond Maurer: Goethe University
Ralph Rogalla: Goethe University

No 13-009, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: Social Security benefits are currently provided as a lifelong benefit stream, though some workers would be willing to trade a portion of their annuity streams in exchange for a lump sum amount. This paper explores whether allowing people to receive a lump sum as a payment for delayed retirement rather than as an addition to their lifetime Social Security benefits might induce them to work longer. We model the factors that influence how people trade off a Social Security stream for a lump sum, and we also examine the consequences of such tradeoffs for work, retirement, and life cycle wellbeing. Our base case indicates that workers given the chance to receive their delayed retirement credit as a lump sum payment would boost their average retirement age by 1.5-2 years. This will interest policymakers seeking to reform the Social Security system without raising costs or cutting benefits, while enhancing the incentives to delay retirement.

Date: 2013-12
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Related works:
Working Paper: Exchanging Delayed Social Security Benefits for Lump Sums: Could This Incentivize Longer Work Careers? (2013)
Working Paper: Exchanging Delayed Social Security Benefits for Lump Sums: Could This Incentivize Longer Work Careers? (2012)
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