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The Effects of Changes in Social Security’s Delayed Retirement Credit: Evidence from Administrative Data

The delayed retirement credit (DRC) increases monthly OASI (Old Age and Survivors Insurance) retired worker benefits for primary beneficiaries who claim after their full retirement age (FRA). For many years, the DRC was set at 3.0 percent per year (0.25 percent monthly). The 1983 amendments to Social Security more than doubled this actuarial adjustment to 8.0 percent per year, with the changes phased in gradually over time. In this paper, we use administrative data from the Social Security Administration (SSA) to estimate the effect of this policy change on individual claiming behavior and labor supply. We focus on the first half of the DRC increase (from 3.0 to 5.5 percent) given changes in other SSA policies that coincided with the later increases. Our findings demonstrate that the increase in the DRC led to an increase in delayed claiming of Social Security benefits among men and strongly suggest that the effects were larger for those with higher lifetime incomes, who would have a greater financial incentive to delay given their longer life expectancies. Furthermore, liquidity constraints play an important role in responsiveness to DRC increases. We do not find evidence of changes to the claiming behavior of women or to labor supply for either men or women.

Mark Duggan
Irena Dushi
Sookyo Jeong
Gina Li
Publication Date
April, 2023