Which Households Benefit from Delayed Claiming?

Abstract

Although Social Security benefits are gender neutral, survivor benefits may lead to opposite claiming-age incentives for many husbands and wives. The typical wife’s survivor benefit rises with the age at which her husband claims his retired-worker benefit. Yet, it does not depend on her retired-worker claiming age, which should lead her to claim her own benefit earlier. We find that spousal claiming age decisions tend to increase lifetime benefits of households. Married men claim later than single men, controlling for lifetime earnings; and married men with younger wives claim even later, though few delay as long as they should to maximize expected lifetime benefits. Married women, meanwhile, claim earlier than single women. Next, we find that married men have substantially lower mortality than single men, controlling for lifetime earnings and claiming age, further increasing the gain from delaying claiming. Incorporating these differences into household benefit calculations, we find that the return to delayed claiming of the husband’s retired-worker benefit is substantially more than actuarially fair, but for different reasons by household type. For disadvantaged households, the return to delay by the husband arises more from gains to the survivor benefit than to his retired-worker benefit. For advantaged households, the return to delay arises largely from the gains to husbands’ retired-worker benefits. Thus, adverse selection in claiming ages by high-earning men raises costs to the Old-Age and Survivors Insurance Trust Fund. In contrast, lower-earning men, who claim relatively early, on average, forgo an important gain from delay in the form of higher survivor benefits for their wives.