Actuarial Nonequivalence in Early and Delayed Social Security Benefit Claims

Abstract

Age-related adjustments to Social Security benefits are intended to be actuarially equivalent, on average, rendering lifetime benefits invariant to the timing of first receipt. This article analyzes actuarial equivalence with respect to early and delayed Social Security benefit claims using a large sample of current and former retired-worker beneficiaries. We find substantial deviations from actuarial equivalence that have resulted in “actuarial premiums” for males, particularly low-income males, and “actuarial losses” for females who accept benefits early. Gender-neutral actuarial adjustments partially offset the female life expectancy advantage in Social Security. For delayed claims, the 8% credit scheduled in current law is too low for actuarial equivalence. The patterns of actuarial nonequivalence should be considered in analyses of claiming behavior or in simulations of Social Security reform proposals that may affect claiming behavior.