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Social Security Programs and Retirement around the WorldMicro-Estimation$
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Jonathan Gruber and David A. Wise

Print publication date: 2004

Print ISBN-13: 9780226310183

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226309989.001.0001

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The Effect of Social Security on Retirement in the United States

The Effect of Social Security on Retirement in the United States

(p.691) 12 The Effect of Social Security on Retirement in the United States
Social Security Programs and Retirement around the World

Courtney Coile

Jonathan Gruber

University of Chicago Press

This chapter examines the impact of Social Security (SS) on retirement, taking advantage of newly available data on retirement behavior and methodological advances in retirement modeling over the past decade. The data set, the Health and Retirement Study, follows a sample of near-retirement-age individuals starting in 1992 and contains detailed information on demographic and job characteristics, labor force attachment, earnings histories, health, and private pensions. The study has two major findings. First, retirement appears to respond much more to SS incentive variables defined with reference to the entire future stream of retirement incentives than to the accrual in retirement wealth over the next year alone, indicating that it is important to include forward-looking measures such as peak value or option value in retirement models. Second, simulations of the effect of two possible policy changes—raising the early and normal retirement ages by three years or moving to a system with a flat benefit of 60 percent of earnings—show that these policy changes could have significant effects on retirement behavior.

Keywords:   retirement behavior, Health and Retirement, pensions, retirement incentives, retirement policy, retirement age

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