Have People Delayed Claiming Retirement Benefits? Responses to Changes in Social Security Rules

by
Social Security Bulletin, Vol. 67, No. 2, 2007

Using a 1 percent sample of Social Security Administration data, this article documents and analyzes responses in the entitlement age for old-age benefits following the recent changes in Social Security rules. Both rules, the removal of the retirement earnings test (RET) for persons who are at the full retirement age (FRA) through age 69 in 2000 or later and a gradual increase in the FRA for those who reach age 62 in 2000 or later, are expected to affect the age at which people claim Social Security retirement benefits (or entitlement age) and the work behavior of older Americans.


Jae Song is with the Division of Economic Research, Office of Research, Evaluation, and Statistics, Office of Policy, Social Security Administration. Joyce Manchester, who was also with the Social Security Administration during the preparation of this article, is currently with the Congressional Budget Office.

Acknowledgments: The authors are grateful to Ed DeMarco, Linda Maxfield, and Susan Grad for their support. Chris Moore made substantial contributions to an earlier draft of the paper as an intern at SSA. The authors thank Ben Bridges, Kimberly Burham, Michael Leonesio, Scott Muller, and David Weaver for helpful comments; Bill Kearns and Joel Packman for help with data; and Tom Solomon and Barbara Tyler for providing computer resources. The findings and conclusions in this article are those of the authors and do not necessarily represent the views of the Social Security Administration. The paper was prepared for and presented at the ISSA Research Conference held in Warsaw in March 2007.

Summary

This article examines changes in the age at which people claim Social Security retirement benefits in response to two recent changes in the Social Security rules: the removal of the retirement earnings test at ages 65 to 69 in 2000 and the gradual increase in the full retirement age (FRA) for those born in 1938 or later. Data come from the 1 percent sample of Social Security administrative data for 1997–2005. Descriptive and regression analyses show that the largest effect of the change in the earnings test rule in 2000 occurs at age 65. At that age, the proportion of people who claim retirement benefits increases by about 4 percentage points among men and 2 percentage points among women. The response to the gradual increase in the FRA occurs not only among those who are close to the FRA but also among those who are close to the early retirement age.

Introduction

Recently, two major changes in Social Security rules became effective: the removal of the retirement earnings test for persons who are at the full retirement age (FRA) through age 69 in 2000 or later and a gradual increase in the FRA for those who reach age 62 in 2000 or later. The FRA is the age at which 100 percent of retirement benefits is payable. Each rule change is expected to affect the entitlement age at which people claim Social Security retirement benefits and the work behavior of older Americans.

The effectiveness of the changes largely depends on how people adjust their age at entitlement. Eliminating the retirement earnings test is meant to encourage older people to work so that their earnings can supplement their Social Security benefits, but how the change affects the age at which older people claim Social Security benefits is less clear. One of the unwanted consequences of the change in the earnings test in 2000 is that claiming benefits at the FRA has become more attractive for those who previously claimed benefits later than the FRA. Accelerated benefit claims at the FRA with continued post-FRA employment reduce benefit amounts by forfeiting the expected long-term increase that otherwise accrues under the program's delayed retirement credit. At the same time, some analysts argue that eliminating the earnings test for those who have reached the FRA through age 69 could affect the benefit claiming ages of those who are younger than the FRA as well.1 If that is true, one of the desired consequences is that those who have not attained the FRA are more likely to continue to work and not claim benefits until they reach the FRA.

Effects of raising the FRA would seem to be more straightforward at first glance. The aim of increasing the FRA is to improve the solvency of the Social Security system by providing stronger disincentives for claiming benefits early. What is not clear is how people actually respond to those disincentives. To understand the effect of the rule changes on Social Security finances and individuals' retirement wealth, we need to examine how people adjust the age at which they claim benefits in response to the rule changes.

Using a 1 percent sample of Social Security administrative data, this article documents and analyzes responses in the entitlement age for old-age benefits following the recent changes in Social Security rules.2 Because the administrative data allow us to determine the exact age at entitlement for all Social Security beneficiaries, we can accurately document responses in benefit entitlement age before and after the rule changes. By doing so, we expect to learn whether people have responded to changes in Social Security rules by modifying the age at which they claim benefits, how responsive they have been, and whether the response is concentrated only around the FRA. One of the most interesting questions surrounding the gradual increase in the FRA is whether it can affect the behavior of those claiming benefits close to the early retirement age. Results here will help shed light on responses by future workers as the FRA continues to rise to age 67 and, more generally, on responses to changes in retirement incentives.

Previous studies have examined effects of the earnings test removal in 2000, but none of them has investigated simultaneously the effects of the gradual increase in the FRA on earnings and old-age benefit entitlement.3 This study investigates effects of both program rule changes. We take advantage of the fact that while the change in the earnings test in 2000 affects those who are at the FRA through age 69 in 2000 or later, the gradual rise in the FRA affects those who reach age 62 in 2000 or later. Since the rule changes are specific to the calendar year and different birth years, we first identify three different groups affected by the changes.

We then examine changes in the distribution of ages at which people claim benefits and benefit entitlement status across time and across birth cohorts. Also investigated are changes in the percentage of persons who are entitled to benefits among those who are fully insured both before and after 2000, by holding age constant. We define a person who is entitled to benefits as one who has filed a claim for a specific type of benefit and has received an award for that benefit. Once an award is made, the person usually receives an immediate payment.

The remainder of this article

Recent Changes in the Retirement Earnings Test and the Full Retirement Age

Under the retirement earnings test, Social Security benefits are reduced or withheld if earnings exceed specified threshold amounts. On April 7, 2000, major changes to the earnings test occurred when President Clinton signed into law the Senior Citizens' Freedom to Work Act of 2000. That law eliminated the earnings test in and after the month in which a person attains the FRA (which was then age 65). Persons receiving old-age benefits who have not reached the FRA remain subject to the earnings test. Social Security benefits of those who do not reach the FRA in the test year are reduced by $1 for every $2 earned beyond the earnings test threshold, which was $11,520 in 2003. Those who reach the FRA during the year are subject to a more moderate test. Benefits are reduced $1 for every $3 earned beyond the modified threshold, which was $30,720 in 2003.4 Thus, the earnings test removal in 2000 not only eliminated the test for those who had attained ages 65–69 (more precisely, FRA to 69), but it also considerably relaxed the test for those turning the FRA (see Song and Manchester (2007) for a more detailed description of the rule change).5

In an effort to improve the solvency of the system, the 1983 Amendments to the Social Security Act gradually raised the full retirement age beginning with those born in 1938, who reach the early retirement age (age 62) in 2000. The FRA is age 65 for those born in 1937 or earlier, but it gradually increases by 2-month intervals beginning with persons born in 1938 until it reaches age 67 for those born in 1960 or later.6 Persons born in 1938 have an FRA of 65 years and 2 months, those born in 1939 at 65 and 4 months, those born in 1940 at 65 and 6 months, and so forth (see Social Security Administration 2005, Table 2.A17.1). Although the FRA is increasing, the age at which a person can start receiving reduced Social Security retirement benefits remains at age 62. For those who become entitled to benefits before the FRA, monthly benefits are reduced from the full benefit amount at the rate of 5/9 of 1 percent per month for the first 36 months before the FRA and 5/12 of 1 percent for any additional months. As a result, the gradual increase in the FRA causes a gradual increase in the permanent benefit reduction for early benefit claimants at any given age (Chart 1).7

Chart 1.
Benefit amounts as a percentage of the primary insurance amount, by birth year and entitlement age
Line chart with tabular version below.
Show as table
Table equivalent for Chart 1. Benefit amounts as a percentage of the primary insurance amount, by birth year and entitlement age
Entitlement age a 1937 or earlier 1938 1939 1940 1941 1942
62 80.0000 79.1667 78.3333 77.5000 76.6667 75.8333
62 & 2 81.1111 80.0000 79.1667 78.3333 77.5000 76.6667
62 & 4 82.2222 81.1111 80.0000 79.1667 78.3333 77.5000
62 & 6 83.3333 82.2222 81.1111 80.0000 79.1667 78.3333
62 & 8 84.4444 83.3333 82.2222 81.1111 80.0000 79.1667
62 & 10 85.5556 84.4444 83.3333 82.2222 81.1111 80.0000
63 86.6667 85.5556 84.4444 83.3333 82.2222 81.1111
63 & 2 87.7778 86.6667 85.5556 84.4444 83.3333 82.2222
63 & 4 88.8889 87.7778 86.6667 85.5556 84.4444 83.3333
63 & 6 90.0000 88.8889 87.7778 86.6667 85.5556 84.4444
63 & 8 91.1111 90.0000 88.8889 87.7778 86.6667 85.5556
63 & 10 92.2222 91.1111 90.0000 88.8889 87.7778 86.6667
64 93.3333 92.2222 91.1111 90.0000 88.8889 87.7778
64 & 2 94.4444 93.3333 92.2222 91.1111 90.0000 88.8889
64 & 4 95.5556 94.4444 93.3333 92.2222 91.1111 90.0000
64 & 6 96.6667 95.5556 94.4444 93.3333 92.2222 91.1111
64 & 8 97.7778 96.6667 95.5556 94.4444 93.3333 92.2222
64 & 10 98.8889 97.7778 96.6667 95.5556 94.4444 93.3333
65 100.0000 98.8889 97.7778 96.6667 95.5556 94.4444
65 & 2 101.0833 100.0000 98.8889 97.7778 96.6667 95.5556
65 & 4 102.1667 101.0833 100.0000 98.8889 97.7778 96.6667
65 & 6 103.2500 102.1667 101.1667 100.0000 98.8889 97.7778
65 & 8 104.3333 103.2500 102.3333 101.1667 100.0000 98.8889
65 & 10 105.4167 104.3333 103.5000 102.3333 101.2500 100.0000
66 106.5000 105.4167 104.6667 103.5000 102.5000 101.2500
 
SOURCE: Social Security Administration (2005), Table 2.A17.1.
a. Entitlement age is measured in 2-month increments; the notation "62.5" = 62 years and 6 months.

Both rule changes could affect Social Security finances as well as individuals' retirement wealth. Consider the responses of persons claiming benefits at ages below the FRA, at the FRA, and above the FRA. First, those who claim benefits at given ages earlier than the FRA would experience additional declines in benefits due to the increased FRA. Second, as pointed out in Gruber and Orszag (2003) and Song and Manchester (2007), workers may delay claiming benefits until they reach the increased FRA in order to receive their full benefits and avoid the earnings test. To the extent that they work longer before claiming benefits, they will also pay Social Security taxes longer. On the cost side, even if lifetime benefits for those who delay claiming benefits are not affected on average, the mortality experience of those who delay claiming could affect the Social Security trust fund finances. Finally, accelerated benefit claiming among workers who have reached the FRA and no longer face the earnings test could result in more years of benefit payments with lower levels of annual benefits. Benefits could be lower because those workers would miss out on the delayed retirement credit, which is discussed in more detail later.

The overall effect of the rule changes on Social Security finances depends on the combination of workers' labor supply responses and benefit-claiming decisions. While choices regarding work participation and work hours affect Social Security revenues, responses in the age at benefit entitlement affect Social Security expenditures as well as individuals' retirement wealth.

An individual can earn a delayed retirement credit (DRC) for each month benefits are not paid beginning with the month in which he or she reaches the FRA and ending with the month before reaching age 70. For those who turned age 65 in 2000–2001, the DRC is 1/2 of 1 percent for each incremental month, or 6 percent per year. The marginal (yearly) percentage increase in the DRC for birth cohorts included in the study is 0.5 percent for every other birth cohort until it reaches 8.0 percent for cohorts born in 1943 or later.8 The increase in DRC does not affect benefit amounts as significantly as the two rule changes, but it might be considered to be a third change in the study period. Interaction between the FRA changes and the DRC changes could dilute the pure effect of raising the retirement age. Identifying the separate effects of these changes, however, is left for future research.

The focus of this article is on the effects of the Social Security rule changes, but swings in economic activity, ongoing trends in labor force participation among older workers, and other factors can also influence the age at which people claim retirement benefits. For example, the economy was in recession during 2001–2002, with the unemployment rate reaching 6.0 percent in 2003. This recession may have resulted in older persons encountering difficulty holding on to existing jobs or finding new jobs. As a result, delays in claiming retirement benefits shown here may be understated to some degree.

Data and Analytical Strategy

The data used in this study come from a number of 1 percent extracts of Social Security Administration data, including the Continuous Work History Sample (CWHS) 2004, Master Beneficiary Record (MBR), and Numident master file of Social Security numbers. Those administrative data extracts contain the exact month and year of entitlement for Old-Age, Survivors, and Disability Insurance (OASDI) benefits, the type of benefits (primary or auxiliary), and date of birth. Therefore, the age and month at benefit entitlement—the most important variable in this study—can be precisely derived. Further, 1 percent extracts can be easily matched across different files using identification numbers. The 1 percent samples are selected by a "stratified cluster design" based on certain serial digits of the Social Security number. They are generally considered to be random samples and contain a large number of observations that represent the general population.

The Continuous Work History Sample is an analytical master file for the 1 percent sample of Social Security numbers ever issued and is the base data set used for this article. The file is derived from several administrative master files, including the MBR and the Master Earnings File, to support research and statistical analysis of the Social Security programs. The CWHS contains information on each individual's demographic characteristics, longitudinal earnings (Social Security-covered annual earnings from 1951 to the present and total annual wages from 1978 to the present), OASDI benefit entitlement status, and death information (if any). The CWHS has both an active and an inactive file. The active file includes workers who ever reported earnings from any employment. Before 1978, the CWHS tracked only earnings covered by Social Security. However, starting in 1978, the CWHS was extended to include uncovered earnings. The inactive sample includes those who never worked in covered or uncovered employment. By combining both the active and inactive files, we can analyze the earnings and OASDI program participation of our 1 percent sample of the U.S. population with valid Social Security numbers.

The semiannual Master Beneficiary Record extract contains data related to the administration of the OASDI program such as application and entitlement dates, benefit amounts, payment status, type of benefits, and demographic information. An MBR record is established whenever an individual application for benefits is processed. The MBR has one record for each primary beneficiary (the worker on whose earnings the benefit entitlement exists). However, each MBR record can contain more than one beneficiary.

Lastly, we merged our base data set with a 1 percent extract of the Numident file. The Numident is a master file of assigned Social Security numbers that contains birth and death dates, place of birth, race, and sex.9 Information on date of death permits us to eliminate those in the sample who died. Thus, our sample includes only those who are alive at the end of each reference year.

Investigating how changes in the rules affect age at entitlement requires a data source with precise information on age, birth month and year, and month and year of entitlement. The elimination of the retirement earnings test affects those from age 65 (or FRA) to age 69. In a given year, anyone older than age 69 or younger than the full retirement age will not be affected directly by the elimination of the retirement earnings test. However, because the FRA gradually increases by 2-month intervals, the year in which a person becomes affected by the elimination of the retirement earnings test not only depends on the year in which they were born but also on the month in which they were born. For example, someone born in November through December 1939 would reach the FRA not in 2004 but in 2005. Yet someone born in January through October 1939 would reach the FRA in 2004. Only the year of birth, however, determines who is affected by the FRA increase.

Whereas the earnings test removal in 2000 was a relatively abrupt change in a Social Security program parameter, the gradual increase in the FRA was anticipated for many years following the enactment of the 1983 amendments. The earliest birth cohort affected by the 1983 amendments reached their FRA in 2003–2004. Thus, a forward-looking individual would have adjusted his or her labor supply over the last 20 years in order to compensate for the expected benefit reduction due to the increase in the FRA. Unlike ongoing labor supply decisions, benefit claiming can occur only after reaching the early retirement age. Thus, the standard before-and-after or difference-in-difference approach is valid in evaluating the effect of the 1983 amendment on the age at which benefits are claimed. It is worth noting, however, that larger compensating adjustments in labor supply result in smaller estimated effects on the age at benefit entitlement.

The fact that the "treatment" in this study depends on both time and age suggests a quasi-experimental study using a standard design. Thus, our analysis relies primarily on comparing benefit entitlement probabilities and entitlement hazards over the period before and after the rule changes became effective, holding age constant. Entitlement hazard refers to the probability that those who have not yet claimed benefits will do so during the specified period.

Three distinct treatment groups emerge from the rule changes (Chart 2).

Chart 2.
Effect of rule changes on treatment groups, by birth year and calendar year
Timeline diagram fully described in chart notes.
SOURCE: Social Security Administration (2005, Tables 2.A17.1 and 2.A29).
NOTES: Birth year is defined in years and months for cohorts born in 1938–1942. Persons born during this period are shown in two separate groups, depending on the calendar year in which they reach the FRA. For example, those born in January–October 1938 reach the FRA in 2003, but those born in November–December 1938 reach the FRA in 2004.
The first treatment group is affected only by the 2000 earnings test rule change. That group consists of those who were born in 1930–1935, 1931–1936, 1932–1937, 1933–1937, 1934–1937, 1935–1937, respectively, for 2000, 2001, 2002, 2003, 2004, and 2005. The second treatment group is affected by both the increase in the FRA and the change in the earnings test in 2000. It consists of those who were born in January 1938 through October 1938, January 1938 through August 1939, and January 1938 through June 1940, respectively, for 2003, 2004, and 2005. The third treatment group, which consists of those born in 1938 or later for years prior to attainment of the FRA, is affected only by the increase in the FRA. For example, for the year 2000, the 1938 cohort would not be directly affected by the earnings test change because they were too young in that year.
RET = retirement earnings; FRA = full retirement age.

Descriptive Analysis

An Overview of the 1 Percent Sample

For 1997–2005, year-end counts of OASI beneficiaries and persons who are fully insured (as of age 60) give us a good overview of the 1 percent data (Table 1). In our 1 percent sample, 24,524 men and 21,797 women aged 62–64 in 2000 are fully insured.11 Only 292 of the 10,374 auxiliary beneficiaries in that age group in 2000 are male. While the number of women auxiliary beneficiaries tends to drop significantly over the study period, the number of men auxiliary beneficiaries appears to remain relatively stable. Primary beneficiaries include individuals who claim benefits as dual beneficiaries—those receiving both a primary benefit and a partial spouse or survivor benefit. Although primary beneficiaries include dual beneficiaries, we note that the reduction factors for the spouse and survivor portion of benefits are different than for primary benefits and that the FRA increase for survivor benefits has a different schedule than that for primary or spouse benefits (Social Security Administration 2005, Tables 2.A21–2.A22).

Table 1. OASI benefit entitlement status for those aged 62–70, 1997–2005
Type of entitlement 1997 1998 1999 2000 2001 2002 2003 2004 2005
Aged 62–64
Men
Fully insured 23,154 23,661 24,069 24,524 25,058 25,968 26,699 28,788 31,166
Primary beneficiaries
Number 12,778 12,933 13,190 13,257 13,279 13,383 13,304 13,819 14,539
As a percentage of fully insured 0.5519 0.5466 0.5480 0.5406 0.5299 0.5154 0.4983 0.4800 0.4665
Auxiliary beneficiaries
Number 321 292 300 292 294 291 306 328 370
As a percentage of primary beneficiaries 0.0251 0.0226 0.0227 0.0220 0.0221 0.0217 0.0230 0.0237 0.0254
Women
Fully insured 19,910 20,358 20,867 21,797 22,406 23,235 24,094 26,345 28,416
Primary beneficiaries
Number 10,888 11,138 11,375 11,875 12,051 12,215 12,319 13,174 13,940
As a percentage of fully insured 0.5469 0.5471 0.5451 0.5448 0.5378 0.5257 0.5113 0.5001 0.4906
Auxiliary beneficiaries
Number 10,239 10,193 10,194 10,082 9,881 9,369 9,072 9,044 8,987
As a percentage of primary beneficiaries 0.9404 0.9152 0.8962 0.8490 0.8199 0.7670 0.7364 0.6865 0.6447
Birth year 1933–1935 1934–1936 1935–1937 1936–1938 1937–1939 1938–1940 1939–1941 1940–1942 1941–1943
Aged 65–70
Men
Fully insured 43,660 43,068 42,876 43,058 43,172 43,621 44,592 45,658 47,274
Primary beneficiaries
Number 41,372 40,660 40,521 41,739 41,899 42,321 42,868 43,376 44,267
As a percentage of fully insured 0.9476 0.9441 0.9451 0.9694 0.9705 0.9702 0.9613 0.9500 0.9364
Auxiliary beneficiaries
Number 891 881 874 862 860 852 846 841 868
As a percentage of primary beneficiaries 0.0215 0.0217 0.0216 0.0207 0.0205 0.0201 0.0197 0.0194 0.0196
Women
Fully insured 38,126 38,090 38,231 38,344 38,427 38,991 40,044 41,113 42,634
Primary beneficiaries
Number 31,896 31,928 32,244 32,933 33,214 33,771 34,735 35,499 36,709
As a percentage of fully insured 0.8366 0.8382 0.8434 0.8589 0.8643 0.8661 0.8674 0.8634 0.8610
Auxiliary beneficiaries
Number 28,606 28,517 28,365 28,289 27,730 27,466 27,069 26,530 26,091
As a percentage of primary beneficiaries 0.8969 0.8932 0.8797 0.8590 0.8349 0.8133 0.7793 0.7473 0.7108
Birth year 1927–1932 1928–1933 1929–1934 1930–1935 1931–1936 1932–1937 1933–1938 1934–1939 1935–1940
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.
NOTES: Dual beneficiaries are counted in both primary and auxiliary beneficiary categories.
OASI = Old-Age and Survivors Insurance.

Interestingly, the percentage of persons who are fully insured and become primary beneficiaries before age 65 remains relatively constant until 1999 and then gradually decreases over the rest of the study period. Because those born in 1938 reach age 62 in 2000, the gradual decrease in the percentage of primary beneficiaries probably arises in large part from delayed benefit claiming among those born in 1938 or later. Declines in the percentage of primary beneficiaries beginning in 2003 seem plausible because 2003 is the first year in which those aged 65 face the higher FRA. A part of the gradual decline, known as the spillover effect associated with the earnings test removal, may be attributed to individuals aged 62–64 who continue to work and delay claiming benefits until they reach age 65 following the removal of the earnings test. Of course, that effect is unlikely to be as large as the direct effect of the rising FRA.

Among those aged 65–70, the percentage of primary beneficiaries increases over the 2000–2002 period and then gradually declines over the rest of the study period. Responses to removal of the earnings test in 2000 and raising the FRA are evident here. The percentage of male primary beneficiaries drops from 96 percent to 95 percent between 2003 and 2004, followed by a decline from 95 percent to 93.6 percent between 2004 and 2005. The percentage of female primary beneficiaries also drops during both time intervals, but fairly insignificantly (less than 1 percentage point). It is notable that the drops for both men and women come at the same time that the increase in the FRA begins to affect them directly. Smaller declines for women may reflect lower responses among auxiliary beneficiaries such as spouses and widows.

Eliminating the retirement earnings test also appears to affect the share of fully insured individuals who have claimed benefits as primary beneficiaries (Table 1). Among men aged 65–70, 94.5 percent of the fully insured are primary beneficiaries in 1999. In 2000, immediately after the earnings test removal, the percentage of primary men beneficiaries rises nearly 3 percentage points to 97 percent. Female primary beneficiaries also increase more than 1 percentage point to 86 percent.

The rest of our analysis focuses exclusively on primary beneficiaries because their benefit claiming behavior has the biggest effect on household Social Security benefits. Primary-worker beneficiaries are the largest group among Old-Age and Survivors Insurance (OASI) beneficiaries; they constituted approximately 75 percent of total OASI beneficiaries in 2002 (Social Security Administration 2004). Only persons aged 62 or older can claim benefits as primary beneficiaries, so we do not include persons younger than age 62 in the analysis. In addition, we limit our sample to individuals who have accumulated enough quarters of coverage to be fully insured between the year they turn age 21 and the year they reach age 60. Our analytical samples also exclude persons who were ever beneficiaries under the Social Security Disability Insurance program and Old-Age beneficiaries who converted from the Disability Insurance program.

Percentage of Primary Beneficiaries in Each Treatment Group

Our empirical strategy is to trace both the number and the percentage of primary beneficiaries among the fully insured population from 1997–2005, by holding age constant. Data on the population that is fully insured as of age 60 can be found in Table 2 and Chart 3.

Table 2. Number and percentage of primary beneficiaries at the end of each year, by sex and birth year
Birth year 1997 1998 1999 2000 2001 2002 2003 2004 2005
Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women
Number entitled
1927 6,928 5,193
1928 6,909 5,184 6,782 5,239
1929 6,884 5,290 6,764 5,260 6,686 5,311
1930 7,104 5,495 7,000 5,468 6,924 5,427 6,838 5,489
1931 6,838 5,427 6,754 5,427 6,694 5,431 6,682 5,416 6,528 5,467
1932 6,709 5,307 6,773 5,362 6,777 5,372 6,806 5,413 6,695 5,365 6,537 5,390
1933 4,826 3,969 6,587 5,172 6,728 5,259 6,877 5,350 6,766 5,327 6,657 5,293 6,527 5,371
1934 4,433 3,874 4,869 4,211 6,712 5,444 7,051 5,582 6,963 5,563 6,846 5,515 6,720 5,489 6,591 5,503
1935 3,519 3,045 4,581 3,857 5,041 4,221 7,485 5,683 7,451 5,669 7,345 5,645 7,235 5,623 7,115 5,617 7,036 5,705
1936 3,483 3,070 4,581 3,934 5,065 4,293 7,496 5,823 7,448 5,822 7,365 5,807 7,256 5,798 7,196 5,800
1937 3,568 3,220 4,598 4,127 5,037 4,516 7,488 6,106 7,456 6,123 7,385 6,113 7,321 6,127
1938 3,594 3,455 4,708 4,349 5,184 4,723 7,565 6,322 7,892 6,565 7,866 6,596
1939 3,534 3,185 4,642 4,104 5,087 4,510 7,137 5,902 7,932 6,428
1940 3,557 3,387 4,664 4,312 5,164 4,746 6,916 6,052
1941 3,553 3,496 4,739 4,474 5,273 4,968
1942 3,916 3,954 5,254 5,177
1943 4,012 3,794
Percent of entitled
1927 0.9778 0.8680
1928 0.9636 0.8405 0.9740 0.8628
1929 0.9574 0.8444 0.9637 0.8514 0.9758 0.8715
1930 0.9446 0.8297 0.9520 0.8360 0.9613 0.8427 0.9756 0.8652
1931 0.9301 0.8334 0.9417 0.8438 0.9526 0.8545 0.9712 0.8679 0.9746 0.8891
1932 0.9138 0.8071 0.9354 0.8244 0.9493 0.8355 0.9727 0.8527 0.9762 0.8592 0.9777 0.8774
1933 0.6503 0.6181 0.8999 0.8128 0.9313 0.8336 0.9702 0.8550 0.9745 0.8606 0.9777 0.8670 0.9794 0.8909
1934 0.5805 0.5775 0.6464 0.6326 0.9032 0.8246 0.9659 0.8556 0.9714 0.8615 0.9734 0.8644 0.9752 0.8724 0.9777 0.8883
1935 0.4346 0.4490 0.5727 0.5728 0.6377 0.6317 0.9616 0.8570 0.9698 0.8635 0.9721 0.8689 0.9738 0.8742 0.9753 0.8822 0.9778 0.9050
1936 0.4284 0.4406 0.5697 0.5690 0.6381 0.6248 0.9583 0.8536 0.9674 0.8614 0.9718 0.8684 0.9741 0.8757 0.9761 0.8829
1937 0.4392 0.4429 0.5724 0.5716 0.6347 0.6297 0.9553 0.8592 0.9648 0.8678 0.9698 0.8754 0.9721 0.8825
1938 0.4202 0.4484 0.5546 0.5686 0.6178 0.6214 0.9114 0.8376 0.9624 0.8771 0.9669 0.8853
1939 0.4094 0.4199 0.5433 0.5429 0.6017 0.6005 0.8539 0.7909 0.9575 0.8657
1940 0.3938 0.4195 0.5222 0.5368 0.5851 0.5944 0.7899 0.7620
1941 0.3816 0.4089 0.5148 0.5258 0.5770 0.5861
1942 0.3640 0.4013 0.4910 0.5272
1943 0.3542 0.3749
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent MBR extract based on Claim Account Number, and 1 percent MBR extract based on Beneficiary Own Account Number for December 1999–June 2006.
NOTE: Data represent primary beneficiaries who were fully insured at age 60.

Chart 3.
Entitlement probability: Percentage entitled as primary beneficiaries, 1997–2005, by sex and age
Men
Line chart with tabular version below.
Women
Line chart with tabular version below.
Show as table
Table equivalent for Chart 3. Entitlement probability: Percentage entitled as primary beneficiaries, 1997–2005, by sex and age
Age 1997 1998 1999 2000 2001 2002 2003 2004 2005
  Men
70 0.9778 0.9740 0.9758 0.9756 0.9746 0.9777 0.9794 0.9777 0.9778
69 0.9636 0.9637 0.9613 0.9712 0.9762 0.9777 0.9752 0.9753 0.9761
68 0.9574 0.9520 0.9526 0.9727 0.9745 0.9734 0.9738 0.9741 0.9721
67 0.9446 0.9417 0.9493 0.9702 0.9714 0.9721 0.9718 0.9698 0.9669
66 0.9301 0.9354 0.9313 0.9659 0.9698 0.9674 0.9648 0.9624 0.9575
65 0.9138 0.8999 0.9032 0.9616 0.9583 0.9553 0.9114 0.8539 0.7899
64 0.6503 0.6464 0.6377 0.6381 0.6347 0.6178 0.6017 0.5851 0.5770
63 0.5805 0.5727 0.5697 0.5724 0.5546 0.5433 0.5222 0.5148 0.4910
62 0.4346 0.4284 0.4392 0.4202 0.4094 0.3938 0.3816 0.3640 0.3542
  Women
70 0.8680 0.8628 0.8715 0.8652 0.8891 0.8774 0.8909 0.8883 0.9050
69 0.8405 0.8514 0.8427 0.8679 0.8592 0.8670 0.8724 0.8822 0.8829
68 0.8444 0.8360 0.8545 0.8527 0.8606 0.8644 0.8742 0.8757 0.8825
67 0.8297 0.8438 0.8355 0.8550 0.8615 0.8689 0.8684 0.8754 0.8853
66 0.8334 0.8244 0.8336 0.8556 0.8635 0.8614 0.8678 0.8771 0.8657
65 0.8071 0.8128 0.8246 0.8570 0.8536 0.8592 0.8376 0.7909 0.7620
64 0.6181 0.6326 0.6317 0.6248 0.6297 0.6214 0.6005 0.5944 0.5861
63 0.5775 0.5728 0.5690 0.5716 0.5686 0.5429 0.5368 0.5258 0.5272
62 0.4490 0.4406 0.4429 0.4484 0.4199 0.4195 0.4089 0.4013 0.3749
 
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.
NOTE: Data represent primary beneficiaries who were fully insured at age 60.

Entitlement Probability. For both men and women, the percentage aged 65–69 who are entitled as primary beneficiaries increases between 1999 and 2000. Over the same period, the percentage aged 62 decreases slightly. Such results show that after the earnings test change in 2000, benefit claiming among those who had already attained the FRA accelerated at the same time that it slowed down a bit among those younger than the FRA. The slowdown is particularly apparent among those turning age 62. In 2003, when the first birth cohort that faces an increased FRA begins to reach their FRA (age 65 and 2 months), the overall percentage entitled begins to decrease, particularly among those aged 65. The decline continues in 2004 and 2005. For those who are younger than age 65, the percentage entitled decreases slightly over the period 2003–2005, suggesting that a small fraction of those younger than the FRA responded to the FRA rule change as well.

Responses to the rule changes discussed above more than likely understate the effect on persons who can choose whether to become entitled to benefits. The reason for the understatement is that the number of people who have not yet claimed benefits in each age/year group is fairly small. Nearly 90 percent of fully insured people become entitled by age 65 (Table 2).

Entitlement Hazard. We next focus on the percentage of those who are "newly" entitled in a given year, among those who are fully insured but not previously entitled (Table 3 and Chart 4). That measure is known as the entitlement hazard. For example, 19.7 percent of men aged 69 who were not yet entitled became entitled in 1999, whereas 41.8 percent of men aged 69 became entitled in 2000. Further, 32.3 percent of men aged 66 who were not yet entitled became entitled in 1999, whereas 65.9 percent of men aged 66 became entitled in 2000. For men and women aged 65, the entitlement hazards decline noticeably starting from 2003, when the first birth cohorts are affected by the FRA increase. The entitlement hazards for those aged 66 increase nearly 40 percentage points for both men and women in 2004, when those born in November or December 1938 reach their FRA. Results here also show that men are more responsive to the rule changes than women.

Table 3. Number and percentage of persons who become entitled in each year, 1998–2005, by birth year and sex
Birth year 1998 1999 2000 2001 2002 2003 2004 2005
Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women
Number newly entitled
1928 75 47
1929 47 20 81 54
1930 56 23 67 25 103 54
1931 83 47 79 43 132 51 23 39
1932 158 99 100 46 165 81 24 16 9 34
1933 1,806 1,083 230 107 276 116 29 12 21 11 13 27
1934 498 357 1,894 1,108 459 181 37 17 16 9 14 14 15 24
1935 1,097 813 523 381 2,515 1,345 58 28 17 19 11 2 11 15 12 32
1936 3,456 3,008 1,138 863 550 370 2,491 1,416 68 30 34 24 18 10 15 12
1937 3,546 3,152 1,073 912 511 401 2,509 1,478 69 39 41 17 17 9
1938 3,566 3,377 1,137 899 541 390 2,430 1,487 419 239 38 30
1939 3,507 3,105 1,155 910 507 418 2,111 1,309 853 479
1940 3,536 3,308 1,151 931 559 450 1,795 1,233
1941 3,530 3,436 1,232 978 577 498
1942 3,882 3,862 1,347 1,213
1943 3,982 3,732
Percentage fully insured but not entitled at the beginning of each year
1928 0.3012 0.1492
1929 0.1604 0.0683 0.3361 0.2022
1930 0.1393 0.0599 0.1971 0.0702 0.3829 0.1688
1931 0.1711 0.1199 0.1990 0.1280 0.4177 0.1783 0.1278 0.1696
1932 0.2577 0.2041 0.2217 0.1217 0.4783 0.2477 0.1348 0.0664 0.0596 0.1532
1933 0.7152 0.6760 0.3226 0.2432 0.5823 0.3580 0.1472 0.0594 0.1273 0.0595 0.0909 0.1570
1934 0.1591 0.1747 0.7273 0.6798 0.6585 0.4151 0.1581 0.0680 0.0821 0.0388 0.0791 0.0639 0.0932 0.1176
1935 0.2450 0.2705 0.1561 0.1807 0.8976 0.8059 0.2094 0.1134 0.0787 0.0880 0.0564 0.0103 0.0608 0.0785 0.0723 0.1850
1936 0.4277 0.4794 0.2491 0.2808 0.1623 0.1732 0.8874 0.8237 0.2194 0.1310 0.1429 0.1212 0.0891 0.0585 0.0820 0.0750
1937 0.4389 0.4775 0.2395 0.2807 0.1513 0.1782 0.8825 0.8257 0.2136 0.1660 0.1621 0.0890 0.0806 0.0523
1938 0.4196 0.4795 0.2326 0.2589 0.1457 0.1563 0.7712 0.7243 0.5877 0.5000 0.1297 0.1266
1939 0.4086 0.4509 0.2298 0.2536 0.1318 0.1603 0.6378 0.6114 0.7174 0.6311
1940 0.3932 0.4462 0.2133 0.2359 0.1332 0.1535 0.4963 0.5080
1941 0.3813 0.4358 0.2180 0.2290 0.1311 0.1554
1942 0.3631 0.4224 0.1996 0.2370
1943 0.3536 0.3976
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number, and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.

Chart 4.
Entitlement hazard: Percentage newly entitled, 1998–2005, by sex and age
Men
Line chart with tabular version below.
Women
Line chart with tabular version below.
Show as table
Table equivalent for Chart 4. Entitlement hazard: Percentage newly entitled, 1998–2005, by sex and age
Age 1998 1999 2000 2001 2002 2003 2004 2005
  Men
70 0.3012 0.3361 0.3829 0.1278 0.0596 0.0909 0.0932 0.0723
69 0.1604 0.1971 0.4177 0.1348 0.1273 0.0791 0.0608 0.0820
68 0.1393 0.1990 0.4783 0.1472 0.0821 0.0564 0.0891 0.0806
67 0.1711 0.2217 0.5823 0.1581 0.0787 0.1429 0.1621 0.1297
66 0.2577 0.3226 0.6585 0.2094 0.2194 0.2136 0.5877 0.7174
65 0.7152 0.7273 0.8976 0.8874 0.8825 0.7712 0.6378 0.4963
64 0.1591 0.1561 0.1623 0.1513 0.1457 0.1318 0.1332 0.1311
63 0.2450 0.2491 0.2395 0.2326 0.2298 0.2133 0.2180 0.1996
62 0.4277 0.4389 0.4196 0.4086 0.3932 0.3813 0.3631 0.3536
  Women
70 0.1492 0.2022 0.1688 0.1696 0.1532 0.1570 0.1176 0.1850
69 0.0683 0.0702 0.1783 0.0664 0.0595 0.0639 0.0785 0.0750
68 0.0599 0.1280 0.2477 0.0594 0.0388 0.0103 0.0585 0.0523
67 0.1199 0.1217 0.3580 0.0680 0.0880 0.1212 0.0890 0.1266
66 0.2041 0.2432 0.4151 0.1134 0.1310 0.1660 0.5000 0.6311
65 0.6760 0.6798 0.8059 0.8237 0.8257 0.7243 0.6114 0.5080
64 0.1747 0.1807 0.1732 0.1782 0.1563 0.1603 0.1535 0.1554
63 0.2705 0.2808 0.2807 0.2589 0.2536 0.2359 0.2290 0.2370
62 0.4794 0.4775 0.4795 0.4509 0.4462 0.4358 0.4224 0.3976
 
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.

Entitlement Age Distribution by Entitlement Year and Birth Year

We next present the distribution of benefit entitlement ages by entitlement year and birth cohort. Comparing the distribution across different entitlement years and different birth cohorts provides data on the changes in claiming behavior as both rule changes become effective.

Cumulative distributions by year of entitlement in Chart 5 show the percentage of fully insured people who have claimed benefits as of a specific age in each year 1997–2005. Here we choose the age range from 62 to 70 because the percentage of those who become entitled by age 70 tends to be stable before and after the rule changes (Table 2). Several interesting aspects are evident. First, the distribution of males shifts more than that of females, suggesting again that males are more responsive to the rule changes than females. Second, in the years following the earnings test removal, the curves shift downward for ages 62–65. They jump up at age 65 and then exhibit a stair-step incline as the FRA rises, indicating that the removal of the earnings test somewhat affects the benefit entitlement age for those who are younger than the FRA. Third, gradual downward shifts in the curves in the segment for those at entitlement age 65 or older appear to be a result of the gradual increase in the FRA for those who are born in 1938 or later. Fourth, the curves of 2000 through 2005, particularly for those at the segment younger than the entitlement age 65, are tightly packed, perhaps reflecting both the additional benefit reduction as the FRA increases and the absence of an earnings test starting at the FRA.

Chart 5.
Cumulative percentage distribution of entitlement age, by sex and entitlement year
Men
Line chart with tabular version below.
Women
Line chart with tabular version below.
Show as table
Table equivalent for Chart 5. Cumulative percentage distribution of entitlement age, by sex and entitlement year
Entitlement age a 1998 2000 2003 2005
  Men
62 3.6083 3.5533 3.4188 3.4032
62.083 52.3853 51.8633 51.2403 51.0947
62.167 54.9316 54.2734 53.6001 53.5135
62.25 56.944 56.2354 55.5052 55.3254
62.333 58.5702 57.7788 57.0549 56.846
62.417 60.0885 59.2355 58.3737 58.1718
62.5 61.2963 60.3714 59.5626 59.3562
62.583 62.3129 61.3505 60.5025 60.3889
62.667 63.3144 62.3094 61.4352 61.3216
62.75 64.278 63.2056 62.3228 62.2284
62.833 65.2321 64.1018 63.2014 63.1559
62.917 66.067 64.8947 63.9591 63.9662
63 67.112 65.8683 64.9117 64.9661
63.083 68.1835 66.8327 65.8859 65.9695
63.167 68.9086 67.5334 66.5228 66.6091
63.25 69.6488 68.2433 67.2517 67.3401
63.333 70.2432 68.8149 67.8182 67.8987
63.417 70.8944 69.4031 68.3901 68.4694
63.5 71.4207 69.901 68.9133 68.9883
63.583 71.9224 70.4099 69.4148 69.5141
63.667 72.4638 70.9299 69.8947 69.9813
63.75 72.9466 71.389 70.362 70.4537
63.833 73.4729 71.8721 70.8329 70.9347
63.917 73.9575 72.3478 71.3272 71.4174
64 74.6864 72.9932 71.937 72.0363
64.083 75.3452 73.587 72.5143 72.6328
64.167 75.845 74.0498 72.9888 73.1121
64.25 76.3088 74.4868 73.42 73.5414
64.333 76.7385 74.9349 73.9594 74.0379
64.417 77.1929 75.3775 74.4447 74.5568
64.5 77.7116 75.9344 75.031 75.105
64.583 78.3098 76.4821 75.5686 75.5998
64.667 79.3719 77.4317 76.5825 76.5187
64.75 81.5869 79.473 78.9621 78.7582
64.833 83.8681 81.5677 81.2768 81.0253
64.917 86.1607 83.6071 83.3479 83.0062
65 96.5806 95.0194 95.0151 91.6884
65.083 96.8835 95.3882 95.4445 92.497
65.167 97.1183 95.6242 97.4507 95.0261
65.25 97.3417 95.9008 97.6419 95.4709
65.333 97.5178 96.1516 97.8367 97.7466
65.417 97.6882 96.371 97.9937 97.8966
65.5 97.8359 96.5757 98.1579 99.1034
65.583 97.9855 96.7748 98.3022 99.1844
65.667 98.0877 96.9555 98.4664 99.2534
65.75 98.188 97.1141 98.5999 99.3137
65.833 98.3054 97.2764 98.7172 99.3671
65.917 98.4114 97.4294 98.8254 99.4154
66 98.5117 97.5566 98.9192 99.4602
66.083 98.595 97.6672 98.9968 99.4895
66.167 98.6707 97.776 99.069 99.5274
66.25 98.718 97.9051 99.1827 99.555
66.333 98.7937 98.0305 99.2621 99.5981
66.417 98.8694 98.1448 99.3415 99.6395
66.5 98.9489 98.2186 99.4046 99.674
66.583 99.0208 98.3182 99.4677 99.6964
66.667 99.0738 98.3864 99.5092 99.7102
66.75 99.123 98.4657 99.576 99.7378
66.833 99.1874 98.5487 99.6337 99.7568
66.917 99.2366 98.6261 99.6698 99.774
67 99.2858 98.7146 99.7257 99.793
67.083 99.3161 98.7755 99.7473 99.8051
67.167 99.354 98.8456 99.7635 99.8223
67.25 99.3843 98.9101 99.7761 99.8344
67.333 99.4108 98.9691 99.7851 99.8482
67.417 99.4354 99.006 99.814 99.8551
67.5 99.4581 99.0687 99.8356 99.8672
67.583 99.4827 99.1148 99.8518 99.8793
67.667 99.5111 99.1664 99.8608 99.8845
67.75 99.53 99.2088 99.8716 99.8897
67.833 99.5546 99.2586 99.877 99.8914
67.917 99.5811 99.3121 99.8824 99.8914
68 99.6114 99.36 99.8914 99.8948
68.083 99.6436 99.4079 99.895 99.9034
68.167 99.6512 99.4669 99.8986 99.912
68.25 99.6834 99.513 99.9076 99.9189
68.333 99.6891 99.5499 99.9148 99.9223
68.417 99.7061 99.5794 99.9166 99.9292
68.5 99.725 99.6015 99.931 99.9378
68.583 99.7401 99.6236 99.9418 99.9464
68.667 99.7496 99.6531 99.9436 99.9481
68.75 99.7553 99.6808 99.9454 99.9533
68.833 99.7667 99.6919 99.9526 99.9567
68.917 99.7762 99.7085 99.9562 99.9567
69 99.8046 99.7417 99.958 99.9636
69.083 99.816 99.773 99.9616 99.967
69.167 99.8293 99.8043 99.967 99.9687
69.25 99.8501 99.8301 99.9688 99.9721
69.333 99.8709 99.8578 99.9706 99.9755
69.417 99.8823 99.8891 99.9706 99.9841
69.5 99.8956 99.9131 99.976 99.9875
69.583 99.9051 99.9279 99.9778 99.9892
69.667 99.9108 99.9427 99.9814 99.9892
69.75 99.9127 99.9556 99.9832 99.9909
69.833 99.9203 99.9648 99.9868 99.9909
69.917 99.926 99.9703 99.9868 99.9926
70 99.9998 99.9998 99.9994 99.9995
  Women
62 3.6561 3.7071 3.6268 3.5341
62.083 56.1375 56.0614 55.1698 54.8216
62.167 58.5432 58.4344 57.5002 57.1225
62.25 60.3889 60.2268 59.2456 58.8039
62.333 61.8999 61.8257 60.7855 60.3169
62.417 63.2137 63.075 62.0471 61.6301
62.5 64.3126 64.1104 63.0747 62.7577
62.583 65.2671 65.0134 64.0676 63.7654
62.667 66.1617 65.9504 64.9877 64.7132
62.75 67.0352 66.8127 65.7782 65.5782
62.833 67.9334 67.6512 66.6794 66.5317
62.917 68.7787 68.4659 67.4857 67.3738
63 69.7297 69.4063 68.4501 68.4072
63.083 70.6525 70.3297 69.5347 69.4891
63.167 71.3499 71.0392 70.2461 70.217
63.25 72.0156 71.7046 70.8817 70.8393
63.333 72.558 72.2512 71.4635 71.4873
63.417 73.1638 72.8012 72.0896 72.0697
63.5 73.6921 73.2968 72.6271 72.6264
63.583 74.2099 73.8332 73.1836 73.1774
63.667 74.6819 74.2881 73.6389 73.6056
63.75 75.2525 74.8109 74.1227 74.0709
63.833 75.7914 75.2997 74.6571 74.6361
63.917 76.2141 75.7207 75.0808 75.0843
64 76.834 76.2435 75.6057 75.6552
64.083 77.3236 76.7867 76.2191 76.2747
64.167 77.8484 77.2722 76.6871 76.7943
64.25 78.2887 77.7339 77.1962 77.2653
64.333 78.7219 78.1243 77.6673 77.7192
64.417 79.1939 78.5894 78.1542 78.2216
64.5 79.7117 79.0681 78.6791 78.6955
64.583 80.2999 79.6384 79.2672 79.2436
64.667 81.4376 80.572 80.2601 80.2028
64.75 83.8926 82.8906 82.992 82.7834
64.833 86.2102 85.0361 85.4109 85.2242
64.917 88.3482 86.9066 87.4187 87.1368
65 96.8333 95.9129 96.1109 93.3343
65.083 97.1186 96.2422 96.4492 94.0308
65.167 97.3088 96.4459 98.027 96.012
65.25 97.499 96.6869 98.1756 96.3974
65.333 97.6822 96.9008 98.3179 98.0474
65.417 97.9041 97.0909 98.4191 98.1816
65.5 98.0485 97.2912 98.5424 99.0666
65.583 98.1894 97.4609 98.6531 99.1437
65.667 98.3268 97.6035 98.7574 99.2036
65.75 98.4219 97.7053 98.827 99.2521
65.833 98.5205 97.8513 98.9219 99.2892
65.917 98.5804 97.9531 99.0104 99.332
66 98.679 98.0957 99.1084 99.3663
66.083 98.7459 98.2111 99.1811 99.4034
66.167 98.8093 98.2858 99.2285 99.4234
66.25 98.8762 98.3809 99.2854 99.4491
66.333 98.9502 98.4827 99.3581 99.4948
66.417 99.003 98.5574 99.415 99.5205
66.5 99.0734 98.6423 99.4782 99.5519
66.583 99.1333 98.7136 99.5351 99.6033
66.667 99.1615 98.7577 99.573 99.6347
66.75 99.2038 98.812 99.6078 99.6518
66.833 99.2496 98.8595 99.6489 99.6775
66.917 99.2778 98.8968 99.6647 99.6946
67 99.3271 98.9579 99.69 99.7146
67.083 99.3835 99.036 99.7058 99.7203
67.167 99.4152 99.0767 99.7279 99.7431
67.25 99.4434 99.1276 99.7342 99.7517
67.333 99.461 99.1785 99.75 99.7717
67.417 99.4892 99.2158 99.769 99.786
67.5 99.5315 99.2633 99.7943 99.7917
67.583 99.5562 99.3074 99.8006 99.7974
67.667 99.5809 99.3583 99.8101 99.8003
67.75 99.6126 99.3956 99.8164 99.8089
67.833 99.6302 99.4431 99.8227 99.8118
67.917 99.6513 99.4872 99.8259 99.8175
68 99.6689 99.5211 99.8322 99.8204
68.083 99.6936 99.5449 99.8385 99.8347
68.167 99.7006 99.5687 99.8385 99.8433
68.25 99.7147 99.5959 99.8448 99.8462
68.333 99.7323 99.6265 99.8638 99.8491
68.417 99.7429 99.6503 99.8701 99.8548
68.5 99.7605 99.6639 99.8827 99.8691
68.583 99.7711 99.6945 99.8827 99.872
68.667 99.7852 99.7149 99.889 99.8749
68.75 99.7958 99.7285 99.8985 99.8835
68.833 99.8169 99.7591 99.9017 99.8864
68.917 99.831 99.7693 99.9049 99.8864
69 99.838 99.7863 99.9081 99.8864
69.083 99.845 99.8067 99.9113 99.895
69.167 99.845 99.8237 99.9113 99.8979
69.25 99.8626 99.8305 99.9208 99.9065
69.333 99.8661 99.8441 99.9271 99.9151
69.417 99.8802 99.8611 99.9271 99.918
69.5 99.8837 99.8883 99.9303 99.9209
69.583 99.8872 99.8985 99.9303 99.9295
69.667 99.8907 99.9223 99.9303 99.9324
69.75 99.8942 99.9257 99.9335 99.9353
69.833 99.8942 99.9291 99.943 99.9353
69.917 99.9048 99.9427 99.9462 99.9382
70 99.9999 100.0004 100 100.001
 
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.
a. Entitlement age is measured in 2-month increments; the notation "62.5" = 62 years and 6 months.

Sorting out the economic effects of the benefit reductions from the signaling or institutional role of the FRA is a difficult task, but Chart 6 may offer some clues. The chart shows the proportion of men and women among the cohorts born in 1930, 1937, and 1940 who become entitled to retirement benefits at 2-month intervals between ages 62 and 65 and 6 months. The 1937 birth cohort was not affected by the change in the full retirement age. About 42 percent of men in that cohort and 59 percent of women claimed benefits at age 62, the early retirement age. That percentage dropped slightly following the increase in the FRA, to about 40 percent of men and 45 percent of women in the 1940 cohort. The percentage of people who claim benefits after age 62 and a few months before the FRA stays relatively stable at about 1 percent at each age. Benefit reductions alone affect people who retire before age 65, so the drop in the percentage who claim before age 65 largely reflects that benefit reduction.

Chart 6.
Percentage distribution of fully insured men and women, by entitlement age, sex, and birth year
Men
Line chart with tabular version below.
Women
Line chart with tabular version below.
Show as table
Table equivalent for Chart 6. Percentage distribution of fully insured men and women, by entitlement age, sex, and birth year
Entitlement age a 1930 1937 1940
  Men
62 3.3508 2.9412 2.5749
62.083 46.925 45.2271 42.3054
62.167 49.3338 47.4717 44.1704
62.25 51.1909 49.0971 45.5902
62.333 52.7385 50.3355 46.8897
62.417 54.5418 51.5481 48.0809
62.5 55.7529 52.593 49.2962
62.583 56.8026 53.5089 50.1986
62.667 57.8253 54.3474 51.0168
62.75 58.7942 55.2246 51.8952
62.833 59.7362 56.2566 52.8337
62.917 60.7051 57.0048 53.6399
63 61.849 57.9852 54.6025
63.083 62.9929 58.9914 55.529
63.167 63.733 59.5332 56.0584
63.25 64.5135 60.1137 56.8405
63.333 65.1325 60.6168 57.394
63.417 65.8726 61.0683 57.9956
63.5 66.4513 61.6359 58.6574
63.583 66.9492 62.1261 59.2229
63.667 67.5144 62.6163 59.7162
63.75 68.12 63.2226 60.1855
63.833 68.6987 63.7902 60.6427
63.917 69.3312 64.2675 61.112
64 70.0444 64.9641 61.8339
64.083 70.7845 65.5446 62.6521
64.167 71.3362 66.2154 63.0371
64.25 71.9283 66.783 63.5665
64.333 72.3858 67.5312 64.0478
64.417 73.0721 68.1633 64.505
64.5 73.8122 68.8728 65.0104
64.583 74.5658 69.5694 65.3954
64.667 76.0192 71.0142 66.1534
64.75 78.7241 75.039 68.1628
64.833 81.8058 78.522 70.3888
64.917 84.6991 81.0762 72.326
65 98.4388 99.3812 74.9972
65.083 98.8156 99.536 77.151
65.167 99.0444 99.6134 78.7633
65.25 99.327 99.6779 80.7486
65.333 99.5692 99.7682 82.4692
65.417 99.7441 99.8585 84.4184
65.5 99.9998 100.0004 100.0002
  Women
62 3.936 3.6617 3.1868
62.083 56.2724 52.5904 48.3993
62.167 58.2674 54.4292 50.4366
62.25 59.8131 55.7564 51.9791
62.333 61.1071 57.2754 53.3324
62.417 62.3113 58.2828 54.4674
62.5 63.156 59.3861 55.4424
62.583 64.0726 60.0737 56.5774
62.667 65.0072 61.0331 57.4942
62.75 65.798 61.9125 58.1781
62.833 66.6787 62.8879 59.1676
62.917 67.3796 63.6554 59.9388
63 68.2962 64.343 60.8556
63.083 69.1229 65.1585 61.8742
63.167 69.7879 65.7022 62.529
63.25 70.5607 66.3898 63.1402
63.333 70.992 66.9654 63.8096
63.417 71.3694 67.3651 64.3335
63.5 71.7648 67.9407 64.7992
63.583 72.2141 68.4844 65.3376
63.667 72.5915 69.0121 65.7014
63.75 73.1846 69.6517 66.1525
63.833 73.6339 70.3233 66.7346
63.917 74.1551 70.755 67.1712
64 74.6583 71.3626 67.8697
64.083 75.2334 72.0182 68.5391
64.167 75.7546 72.6098 69.1648
64.25 76.3657 73.1535 69.5286
64.333 77.0307 73.7771 69.9361
64.417 77.5339 74.4647 70.3872
64.5 78.1809 75.1363 70.6637
64.583 78.8459 75.8398 71.2167
64.667 80.1759 77.4867 71.9588
64.75 82.9617 81.724 74.4617
64.833 85.6756 84.6181 76.9355
64.917 87.8862 86.7607 78.9728
65 98.6878 99.2327 81.3884
65.083 98.9933 99.3606 83.091
65.167 99.0832 99.5365 84.5025
65.25 99.4427 99.6324 86.467
65.333 99.6943 99.7283 87.8349
65.417 99.892 99.8882 89.5666
65.5 99.9998 100.0001 100.0002
 
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.
a. Entitlement age is measured in 2-month increments; the notation "62.5" = 62 years and 6 months.

As shown in Chart 7, more dramatic changes are evident in the entitlement age distribution. In the 1937 cohort, about 18 percent of men and 12 percent of women claimed benefits at age 65, the FRA for that cohort. As the FRA moved out by 2 months per year for the 1938, 1939, and 1940 cohorts, the spike at the FRA moved out as well. About 16 percent of men and 10 percent of women became entitled to benefits at 65 and 6 months, the relevant FRA for the 1940 cohort. People who previously would have claimed benefits at age 65 but waited until their new, higher FRA were probably responding to a combination of the benefit reduction and the signaling aspect of the Social Security retirement age. It is also possible that the "full" retirement age in integrated private pension plans influenced the age at claiming Social Security benefits. Further investigation will help identify those two effects more clearly.

Chart 7.
Entitlement age distribution, by sex and birth year
Men
Line chart with tabular version below.
Women
Line chart with tabular version below.
Show as table
Table equivalent for Chart 7. Entitlement age distribution, by sex and birth year
Entitlement age a 1937 1938 1939 1940
  Men
62 2.9412 2.909 2.7401 2.5749
62.083 42.2859 40.9108 39.156 39.7305
62.167 2.2446 2.1849 2.2752 1.865
62.25 1.6254 1.8043 1.8226 1.4198
62.333 1.2384 1.2152 1.5535 1.2995
62.417 1.2126 1.1538 1.1254 1.1912
62.5 1.0449 1.0311 1.0642 1.2153
62.583 0.9159 0.6628 1.0398 0.9024
62.667 0.8385 0.8592 0.893 0.8182
62.75 0.8772 0.6874 0.893 0.8784
62.833 1.032 0.8592 0.9297 0.9385
62.917 0.7482 0.7733 0.7706 0.8062
63 0.9804 0.7856 1.0153 0.9626
63.083 1.0062 1.0433 0.844 0.9265
63.167 0.5418 0.5524 0.6116 0.5294
63.25 0.5805 0.8224 0.6728 0.7821
63.333 0.5031 0.5401 0.6606 0.5535
63.417 0.4515 0.5892 0.6116 0.6016
63.5 0.5676 0.491 0.526 0.6618
63.583 0.4902 0.5033 0.5749 0.5655
63.667 0.4902 0.5155 0.3547 0.4933
63.75 0.6063 0.5033 0.5382 0.4693
63.833 0.5676 0.4787 0.4893 0.4572
63.917 0.4773 0.7487 0.4281 0.4693
64 0.6966 0.6628 0.685 0.7219
64.083 0.5805 0.6383 0.5994 0.8182
64.167 0.6708 0.4787 0.5749 0.385
64.25 0.5676 0.491 0.4526 0.5294
64.333 0.7482 0.7119 0.4404 0.4813
64.417 0.6321 0.6874 0.6728 0.4572
64.5 0.7095 0.6874 0.5015 0.5054
64.583 0.6966 0.6383 0.6728 0.385
64.667 1.4448 1.0433 0.9419 0.758
64.75 4.0248 2.8231 2.1407 2.0094
64.833 3.483 3.0563 2.8502 2.226
64.917 2.5542 3.1668 2.5199 1.9372
65 18.305 3.5473 3.156 2.6712
65.083 0.1548 2.1971 2.1407 2.1538
65.167 0.0774 15.834 1.8593 1.6123
65.25 0.0645 0.356 2.0917 1.9853
65.333 0.0903 0.1964 15.5719 1.7206
65.417 0.0903 0.0859 0.2936 1.9492
65.5 0.1419 0.0736 0.2446 15.5818
  Women
62 3.6617 3.4933 2.9975 3.1868
62.083 48.9287 48.5607 46.2608 45.2125
62.167 1.8388 2.2939 1.8387 2.0373
62.25 1.3272 1.5292 1.3752 1.5425
62.333 1.519 0.9895 1.2515 1.3533
62.417 1.0074 0.8696 1.2052 1.135
62.5 1.1033 0.6897 0.9734 0.975
62.583 0.6876 0.8846 1.097 1.135
62.667 0.9594 0.5997 0.8344 0.9168
62.75 0.8794 0.7496 0.788 0.6839
62.833 0.9754 0.9295 0.7726 0.9895
62.917 0.7675 0.7346 0.6644 0.7712
63 0.6876 0.9595 0.8653 0.9168
63.083 0.8155 0.9445 1.0816 1.0186
63.167 0.5437 0.7196 0.6799 0.6548
63.25 0.6876 0.4648 0.6953 0.6112
63.333 0.5756 0.6447 0.5871 0.6694
63.417 0.3997 0.5847 0.6799 0.5239
63.5 0.5756 0.5097 0.7726 0.4657
63.583 0.5437 0.5397 0.5408 0.5384
63.667 0.5277 0.3898 0.3245 0.3638
63.75 0.6396 0.5697 0.4944 0.4511
63.833 0.6716 0.5097 0.6026 0.5821
63.917 0.4317 0.3598 0.4635 0.4366
64 0.6076 0.5397 0.618 0.6985
64.083 0.6556 0.6147 0.5717 0.6694
64.167 0.5916 0.2999 0.4172 0.6257
64.25 0.5437 0.5697 0.3554 0.3638
64.333 0.6236 0.5247 0.3708 0.4075
64.417 0.6876 0.4348 0.7417 0.4511
64.5 0.6716 0.6747 0.4944 0.2765
64.583 0.7035 0.7196 0.4944 0.553
64.667 1.6469 0.9445 1.0043 0.7421
64.75 4.2373 2.8186 2.7194 2.5029
64.833 2.8941 2.8186 2.6576 2.4738
64.917 2.1426 2.8336 2.4567 2.0373
65 12.472 2.6837 2.9512 2.4156
65.083 0.1279 1.8291 1.8232 1.7026
65.167 0.1759 11.5292 1.5451 1.4115
65.25 0.0959 0.1799 1.3752 1.9645
65.333 0.0959 0.2399 11.063 1.3679
65.417 0.1599 0.1349 0.2627 1.7317
65.5 0.1119 0.09 0.2318 10.4336
 
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.
a. Entitlement age is measured in 2-month increments; the notation "62.5" = 62 years and 6 months.

The changing distribution of entitlement ages also affects the average age at entitlement, a simple summary measure that may be useful to both researchers and policymakers. Chart 8 shows the average entitlement age for men and women by birth year, 1928–1940. For comparison purposes, we calculate the average only for those who have become entitled at ages 62 through 65 and 6 months. The average entitlement age for both men and women increased as the FRA rose, starting with those born in 1938 or later. Also suggested is that for every 2-month increase in the FRA, the average entitlement age has increased by approximately 0.65 to 1 month for men and 0.5 to 1 month for women. Increases in the average age at entitlement for those born in 1935 or later were probably caused by the influx of benefit claiming at the FRA following the removal of the earnings test.

Chart 8.
Average age a at entitlement, by sex and birth year
Line chart with tabular version below.
Show as table
Table equivalent for Chart 8. Average age a at entitlement, by sex and birth year
Birth year Men Women
1928 63.1404 62.9834
1929 63.1252 62.9349
1930 63.0892 62.9187
1931 63.0373 62.9110
1932 63.0618 62.9000
1933 63.0793 62.9451
1934 63.1492 62.9594
1935 63.2183 63.0080
1936 63.2221 63.0213
1937 63.2061 63.0172
1938 63.2910 63.0775
1939 63.3602 63.1639
1940 63.4149 63.2054
 
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.
a. Average age at entitlement shown in years and months and measured in 1-month increments.

Regression Analysis of Benefit Entitlement Status at Specific Ages

In this study, the range of age groups affected by the law changes differs over the study period. For example, those affected only by the earnings test removal in 2000 reach ages 65–70 in 2000, but the group affected only by the earnings test removal in 2005 reaches ages 68–70 in 2005. Persons reaching age 65 and 6 months through age 67 in 2005 are affected by both the earnings test removal and the gradual increase in the FRA. Further, those affected by the gradual increase in the FRA in 2000 turn age 62 in 2000, but the affected group in 2002 reaches ages 62–64 in that year. Therefore, estimating a single regression equation based on stacked (repeated) cross-sectional data cannot clearly identify the effects of the rule changes.

Instead, we estimate the effect of rule changes on the probability of benefit entitlement at specific ages using a probit regression method. The dependent variable is binary: 1 if the person is entitled to Old-Age benefits in the reference year; and 0 if the person is not entitled to benefits in that year. The regression equation takes a standard difference-in-difference form:

y i t j = a + g Δ t + h Δ j + β Δ t j + c X i + e i t j ,

where y is the dependent variable that equals 1 when the person is entitled in year t and 0 when the person is not entitled in year t; Δ s  are dummy variables indicating the type of rule change affecting different age groups in different years; index j takes the value 0 or J, where J indicates the jth treatment group and 0 indicates the control group; time index t equals entitled year (2000, 2001, 2002, 2003, 2004, and 2005); and X is a vector of the individual's characteristics, such as race and sex. Effects of the earnings test removal and the increase in the FRA are identified by the  β s   that are the coefficients on the year- and age-specific treatment dummies. Because the probability of benefit entitlement monotonically increases as age rises, one cannot estimate all  β s   with one regression. Thus, we further subdivide the affected group into 7 subgroups according to their ages (Chart 2). We then estimate the effect of the rule changes in the 7 separate regressions, using the age 71–72 group as the control group. For example, the first regression includes those who reach ages 68–70 in each reference year as treatment group 1 and those who reach ages 71–72 as the control group. Similarly, the seventh regression includes those who reach age 62 as the treatment group and those who reach ages 71–72 as the control group.

Persons aged 71–72 appear to be an excellent control group for the analysis. As previously seen in Table 2 and Chart 3, observed (cumulative) benefit entitlement rates at ages 70 or older are largely independent of the two rule changes. The rule changes affect the shape of the age distribution at entitlement between ages 62 and the FRA (or age 70), but probably not the cumulative probability of entitlement at ages 71 and 72.12

In Table 4, we report estimates of the marginal effects on the probability of entitlement of year- and age-specific treatment dummies for men and women separately. Including year- and age-specific treatment dummies rather than only age-specific treatment dummies allows us to investigate the dynamics of benefit claiming at specific ages over the 2000–2005 period.

Table 4. Marginal effects on benefit entitlement, by age and sex
Year Policy effect Men Women
Marginal
effect
Standard
error
Marginal
effect
Standard
error
Age 68–70
2000 RET 0.0112 0.0019 0.0063 0.0032
2001 RET 0.0137 0.0020 0.0117 0.0035
2002 RET 0.0138 0.0021 0.0083 0.0035
2003 RET 0.0112 0.0022 0.0106 0.0032
2004 RET 0.0093 0.0022 0.0097 0.0032
2005 RET 0.0066 0.0023 0.0120 0.0031
Age 67
2000 RET 0.0275 0.0027 0.0109 0.0035
2001 RET 0.0290 0.0027 0.0147 0.0037
2002 RET 0.0280 0.0028 0.0161 0.0038
2003 RET 0.0259 0.0029 0.0115 0.0040
2004 RET 0.0211 0.0031 0.0132 0.0038
2005 RET & FRA (2 months) 0.0148 0.0033 0.0165 0.0035
Age 66
2000 RET 0.0320 0.0024 0.0144 0.0034
2001 RET 0.0358 0.0023 0.0191 0.0034
2002 RET 0.0322 0.0025 0.0145 0.0037
2003 RET 0.0268 0.0028 0.0143 0.0039
2004 RET & FRA (2 months) 0.0221 0.0030 0.0175 0.0038
2005 RET & FRA (4 months) 0.0145 0.0033 0.0070 0.0039
Age 65
2000 RET 0.0460 0.0022 0.0239 0.0032
2001 RET 0.0436 0.0023 0.0216 0.0034
2002 RET 0.0391 0.0025 0.0218 0.0034
2003 RET & FRA (2 months) -0.0032 0.0040 0.0045 0.0041
2004 RET & FRA (4 months) -0.0593 0.0055 -0.0291 0.0053
2005 RET & FRA (6 months) -0.1251 0.0069 -0.0544 0.0059
Age 64
2000 None -0.0039 0.0043 -0.0023 0.0043
2001 None -0.0060 0.0045 0.0001 0.0044
2002 FRA (2 months) -0.0207 0.0048 -0.0089 0.0046
2003 FRA (4 months) -0.0372 0.0052 -0.0265 0.0050
2004 FRA (6 months) -0.0524 0.0055 -0.0346 0.0054
2005 FRA (8 months) -0.0636 0.0058 -0.0458 0.0057
Age 63
2000 None -0.0017 0.0045 -0.0017 0.0044
2001 FRA (2 months) -0.0120 0.0049 -0.0033 0.0046
2002 FRA (4 months) -0.0239 0.0051 -0.0222 0.0051
2003 FRA (6 months) -0.0443 0.0055 -0.0328 0.0053
2004 FRA (8 months) -0.0540 0.0057 -0.0449 0.0055
2005 FRA (10 months) -0.0771 0.0060 -0.0503 0.0057
Age 62
2000   (2 months) -0.0098 0.0051 0.0016 0.0048
2001 FRA (4 months) -0.0168 0.0055 -0.0149 0.0054
2002 FRA (6 months) -0.0334 0.0058 -0.0209 0.0055
2003 FRA (8 months) -0.0502 0.0061 -0.0360 0.0058
2004 FRA (10 months) -0.0697 0.0063 -0.0466 0.0058
2005 FRA (12 months) -0.0850 0.0065 -0.0726 0.0063
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.
NOTES: The dependent variable is binary: 1 if entitled by the end of each year; 0 if not entitled by the end of each year. The sample includes those who are fully insured at age 60.
RET = retirement earnings test; FRA = full retirement age.

Both the direction and the magnitude of the estimated effects accord with our expectations. For men aged 68 to 70, we estimate that benefit entitlement in 2000–2005 rises approximately 1 percentage point as a result of the earnings test removal in 2000. The effects are a bit larger for those who are aged 66, but they are still less than 3 percentage points for men and less than 2 percentage points for women. In 2005, estimated effects are smaller for men and women aged 66 and 67, suggesting that the FRA rule change offsets the effect from the earnings test rule change. For those age 65 in 2000–2002, the change in the earnings test rule increases benefit entitlement by slightly more than 3 percentage points for men and by slightly more than 2 percentage points for women. The FRA becomes the dominant rule change in 2004 and 2005, however, as the estimated marginal effect for those aged 65 turns negative and as large as 12.5 percentage points for men and 5.4 percentage points for women in 2005.

Estimated policy effects for persons aged 64 in 2000–2001 and those aged 63 in 2000 are small and, for the most part, statistically insignificant. Such results are plausible because those age groups are not affected directly by the two rule changes (see Chart 2). Yet estimated effects are all negative and quite large for persons aged 62–64 in other years. A 4-month increase in the FRA results in declines in benefit entitlement rates for men of 1.7, 2.4, and 3.7 percentage points at ages 62, 63, and 64, respectively. For women the declines are 1.5, 2.2, and 2.7 percentage points at ages 62, 63, and 64, respectively. Following the 6-month increase in the FRA, rates for men decline by 3.3, 4.4, and 5.2 percentage points at ages 62, 63, and 64, respectively, and 2.1, 3.3, and 3.5 percentage points for women at those same ages. Those estimates suggest that a relatively large response occurs at age 62 and relatively small but incremental responses at ages 63 and 64.

Following the gradual increase in the FRA, policymakers have asked whether people who are younger than the FRA would change their behavior. Our results show that the largest response occurs among those who are at the early retirement age of 62. Additional small but statistically significant responses are detected at ages 63 and 64 as well.

Estimates reported in Table 5 show how the two rule changes have affected the benefit entitlement hazard. As seen in Chart 4, among those who have reached the FRA a dramatic increase in the entitlement hazard occurs right after the earnings test rule change. The estimated marginal effects in 2000 for those aged 66 or older range from 18 (ages 68–70) to 29 (age 65) percentage points for men and 10 (ages 68–70) to 22 (age 65) percentage points for women. In the succeeding years the marginal effects are small and insignificant except for those at age 65. As expected, the entitlement hazard also increases significantly for those aged 66, rising 19 and 33 percentage points for men in 2004 and 2005, respectively, and 14 and 26 percentage points for women. Persons born in November–December 1938 reach the FRA (65 years and 2 months) in 2004, and those born in September–December 1939 reach the FRA (65 and 4 months) in 2005.

Table 5. Marginal effects on benefit entitlement hazard, by age and sex
Year Policy effect Men Women
Marginal
effect
Standard
error
Marginal
effect
Standard
error
Age 68–70
2000 RET 0.1791 0.0393 0.0985 0.0301
2001 RET -0.0262 0.0146 -0.0008 0.0160
2002 RET -0.0409 0.0126 0.0000 0.0171
2003 RET -0.0592 0.0082 -0.0235 0.0120
2004 RET -0.0627 0.0072 -0.0262 0.0112
2005 RET -0.0622 0.0075 -0.0137 0.0140
Age 67
2000 RET 0.2987 0.0506 0.1893 0.0448
2001 RET -0.0082 0.0173 -0.0203 0.0113
2002 RET -0.0366 0.0114 -0.0055 0.0160
2003 RET -0.0229 0.0138 -0.0021 0.0163
2004 RET -0.0253 0.0128 -0.0235 0.0104
2005 RET & FRA (2 months) -0.0339 0.0108 -0.0055 0.0148
Age 66
2000 RET 0.3715 0.0524 0.1708 0.0446
2001 RET -0.0357 0.0282 -0.0486 0.0152
2002 RET -0.0159 0.0318 -0.0326 0.0195
2003 RET -0.0494 0.0254 -0.0328 0.0186
2004 RET & FRA (2 months) 0.1897 0.0450 0.1428 0.0400
2005 RET & FRA (4 months) 0.3254 0.0478 0.2605 0.0465
Age 65
2000 RET 0.2871 0.0331 0.2248 0.0474
2001 RET 0.2455 0.0346 0.2112 0.0453
2002 RET 0.2577 0.0354 0.2381 0.0464
2003 RET & FRA (2 months) 0.0560 0.0453 0.0460 0.0482
2004 RET & FRA (4 months) -0.1415 0.0464 -0.1178 0.0441
2005 RET & FRA (6 months) -0.2676 0.0446 -0.1981 0.0413
Age 64
2000 None 0.0421 0.0292 0.0339 0.0293
2001 None 0.0086 0.0240 0.0144 0.0254
2002 FRA (2 months) 0.0169 0.0260 0.0095 0.0260
2003 FRA (4 months) -0.0242 0.0205 -0.0168 0.0221
2004 FRA (6 months) -0.0412 0.0183 -0.0406 0.0190
2005 FRA (8 months) -0.0359 0.0194 -0.0323 0.0205
Age 63
2000 None 0.0431 0.0366 0.0559 0.0386
2001 FRA (2 months) 0.0058 0.0315 0.0046 0.0325
2002 FRA (4 months) 0.0211 0.0344 0.0181 0.0352
2003 FRA (6 months) -0.0337 0.0287 -0.0377 0.0294
2004 FRA (8 months) -0.0558 0.0262 -0.0690 0.0261
2005 FRA (10 months) -0.0607 0.0267 -0.0531 0.0284
Age 62
2000 FRA (2 months) 0.0522 0.0468 0.0692 0.0481
2001 FRA (4 months) 0.0020 0.0425 0.0009 0.0439
2002 FRA (6 months) 0.0116 0.0451 0.0214 0.0468
2003 FRA (8 months) -0.0545 0.0409 -0.0462 0.0431
2004 FRA (10 months) -0.1087 0.0377 -0.0986 0.0405
2005 FRA (12 months) -0.1033 0.0389 -0.1066 0.0411
SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number' and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999–2005 and June 2006.
NOTES: The dependent variable is binary: 1 if entitled by the end of each year; 0 if not entitled by the end of each year. The sample includes those who are fully insured at age 60.
RET = retirement earnings test; FRA = full retirement age.

Effects of the earnings test removal in 2000 are reflected in estimates of the entitlement hazard for those aged 65 in 2000–2002. Estimated marginal effects in 2000–2002 are approximately 26 percent to 29 percent for men and 21 percent to 24 percent for women. Starting in 2003, that age group is affected not only by the earnings test removal but also by the gradual increase in the FRA. The estimated marginal effect at age 65 is small and statistically insignificant in 2003 but negative and statistically significant in both 2004 and 2005, indicating that the effects of the gradual increase in the FRA dominate in those years. Estimated marginal effects in 2000–2003 are relatively small for those younger than age 65. However, the marginal effects for those aged 62–64 in 2004 and 2005 are negative, relatively large, and statistically significant.

We can easily derive elasticity estimates of interest from the estimates reported in Table 4. If all else remains constant, we know the percentage change in benefit amounts for all age/year groups affected by the gradual increase in the FRA. We can calculate the elasticity of benefit entitlement probability with respect to benefit amounts using our estimates on percentage changes in benefit entitlement probability by age/year group. The derived elasticity at age 64 ranges from 1.3 to 1.7 for men and from 0.7 to 1.1 for women. At age 62 it ranges from 0.8 to 1.3 for men and 0.7 to 1.2 for women. The larger elasticity at age 64 than at age 62 is plausible because the estimated effects at age 64 cumulate the effects at ages 62, 63, and 64.

Concluding Remarks

This article investigates benefit-claiming behavior among fully insured males and females following the removal of the retirement earnings test in 2000 and the gradual increase in the full retirement age for persons who turn age 65 starting in 2003. Although results presented in this article are based on fairly rudimentary before-and-after analysis and reduced form difference-in-difference analysis, we find that significant responses occur in the age at entitlement around the time that those rule changes come into effect. Several key findings stand out.

Notes

1. See Vroman (1985), Packard (1990), and Gruber and Orszag (2003).

2. A number of studies have analyzed how incentives generated by Social Security program rules have affected labor supply and earnings by exploring the earnings test rule changes. Friedberg investigated three changes in earnings test rules in 1978, 1983, and 1990. Results reported in Gruber and Orszag (2003) for 1973–1998 and in Haider and Loughran (2006) for 1975–2003 are identified by all changes, including gradual increases in the test threshold in each year. Baker and Benjamin (1999) and Disney and Tanner (2002) examined the elimination of a similar earnings test in Canada and the United Kingdom. Song and Manchester (2007) examined the 2000 earnings test change using Social Security administrative data. See Krueger and Meyer (2002) for reviews of and references to other related studies.

3. Examples of past studies on the removal of the earnings test in 2000 include Song (2006), Song and Manchester (2007), Haider and Loughran (2006), and Tran (2004). Duggan, Singleton, and Song (2005) studied the effects of the gradual increase in the FRA using the 1 percent Social Security administrative data, but that study focused on the effect on the rolls of the Social Security Disability Insurance program. Mastrobuoni (2006b) examines the labor supply effects of the 1983 Social Security Amendments. The budgetary impact of the earnings test removal in 2000 has been examined in Mastrobuoni (2006a).

4. See Social Security Administration (2005, Table 2.A29) for a brief history of changes in the retirement earnings test.

5. Note that the more moderate version of the test applied in the year a person turned age 65 even before the 2000 legislation. However, the 2000 legislation completely eliminated the test beginning with the month in which a person turns age 65 (or FRA).

6. The FRA remains at 66 for those who were born from 1942 to 1954; it then gradually increases by 2 months per year starting with those who were born in 1955 until it reaches 67.

7. For example, a person born in 1937 (or earlier) who claims benefits at age 62 receives 80 percent of the PIA, but a person born in 1943 who claims benefits at age 62 receives 75 percent of the PIA (see Chart 1). Thus, the increase in the FRA can be seen as reductions in benefit amounts (given all else constant) that depend on the year of birth.

8. See Social Security Administration (2005, Table 2.A20) for historical DRC values.

9. For further discussion of SSA administrative files, see Panis and others (2000).

10. We note, however, they may be indirectly affected (for example, if the repeal of the earnings test at the FRA affected their benefit-claiming decisions before the FRA).

11. Throughout the rest of this article, we define age to be reference year minus year of birth. Persons who are fully insured have enough quarters of coverage to be eligible for old-age benefits as primary beneficiaries.

12. We have tried two alternative control groups: those who are not fully insured and auxiliary beneficiaries. Those results tend to overestimate effects for older age groups and underestimate effects for younger age groups.

References

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