1. Mauricio Soto International Monetary Fund
Retirement Research Consortium August How do Pension Wealth Shocks affect Working and Claiming? Lalive, Magesan, and Staubli (LMS)
Mauricio Soto
International Monetary Fund

2. Hypothetical Replacement Rates at Retirement
AHV/IV plays a similar role as OASDI in the provision of retirement security
Hypothetical Replacement Rates at Retirement
(percent of preretirement earnings)
Selected Parameters of Main Swiss and U.S. Public Pension Systems, 2017
Before going into the paper, it is important to highlight that there are some similarities between the Swiss and US systems:
-Similar progressivity of benefits (different formulas, but seem to aim for similar replacement rates)
-The US system has higher contribution rates, but some 20 percent of the Swiss system is financed by general revenue
-Both systems have a full retirement age and early retirement age, with increases in benefits up to age 70
-Switzerland has a higher share of elderly relative to the working age population, explaining about 2/3 of the difference in spending to GDP
Sources: 2017 OASDI Trustees Report; Federal Social Insurance Office (Bsvlive).

3. Lalive, Magesan, and Staubli examine the reaction of households to FRA increases
Benefits for Women, by Age of Claiming
(100=benefits at age 62 before 1997 reform)
Pension Wealth for Women at Age 62
(100=wealth at age 62 before 1997 reform)
Sources: Lalive and others (2017); United Nations Population Prospects (2017).

4. Main finding: claiming age seems to move in line with increases in FRA
Percent of Individuals by Age of Claiming Relative to FRA
(assumes individuals work continuously starting at age 20)
Sources: Lalive, Magesan, and Staubli (2017)

5. Using regression discontinuity, authors find robust results for increasing claiming age
Sources: Lalive, Magesan, and Staubli (2017)

6. Delaying claiming seems to sustain levels of annual benefits
Sources: Lalive, Magesan, and Staubli (2017)

7. With lower social security wealth
Sources: Lalive, Magesan, and Staubli (2017)

8. Entitlement Age Distribution, Men, by Birth Year
Findings are consistent with experience in raising FRA in the United States
Entitlement Age Distribution, Men, by Birth Year
Mastrobuoni (2009). The evidence suggests that the mean retirement age of the affected cohorts has increased by about half as much as the increase in the NRA
Kopczuck and Song (2008) use administrative data to show that the increase in the FRA has caused the spike in claiming at age 65 to shift almost completely to the new FRA for the affected cohorts Jae Song and Joyce Manchester (2007) 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.
Sources: Song and Manchester (2007)

9. Social Security Benefit Claiming Hazard
Findings are consistent with experience in raising FRA in the United States (2)
Social Security Benefit Claiming Hazard
Behaghel and Blau(2014) :There is clear evidence that the spike in the claiming hazard moves in lockstep along with the FRA. The spike at age 65 does not completely disappear for the treated cohorts, but it becomes progressively smaller. Very similar patterns appear when men and women are disaggregated (not shown). These results confirm the findings of Song and Manchester (2008), based on administrative data (HRS)
In each graph, the dotted line depicts the claiming hazard for workers born between 1931 and 1936.
Sources: Behaghel and Blau (2014).

10. A few suggestions
Early claimants: most individuals switch claiming to FRA, 20 percent of women and 10 percent of men seem to claim early
Household decisions: analysis suggest that married women delay more than single women
Framing effects: FRA is default; how was the reform explained?
Other controls: earnings (low earners delay same or more than high earners); claiming by job attachment; second pillar pensions

11. What do results imply for 2017 reform proposal?
September 24

12. Thanks
FAD

13. Retirement Age to Obtain Full Benefits, Males in 2014 and 2050
APP1: Global trend to increase statutory retirement ages in public pension systems
Retirement Age to Obtain Full Benefits, Males in 2014 and 2050
(assumes individuals work continuously starting at age 20)
Sources: OECD Pension at a Glance (2015).

14. APP2: Lalive, Magesan, and Staubli examine the reaction of households to FRA increases
What you would do differently if Social Security benefits were cut by 30 percent?
Policy design: impact on well-being—can individuals offset impact on well-being?
Fiscal impact: working longer might increase revenue and GDP
Behavioral response: what explains the spikes in claiming?
A few years ago, somebody asked this question to HRS households; about 1,000 responses, those who responded using the internet in the HRS2004/2006.
Spending less: 67 percent
Working longer: 42 percent
Neither: 25 percent
Sources: Delavande and Rohwedder (2008) using the HRS Internet sample.