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Key Findings Details

Exchanging Delayed Social Security Benefits for Lump Sums: Could This Incentivize Longer Work Careers?
Jing Jing Chai, Raimond H. Maurer, Olivia S. Mitchell and Ralph Rogalla
WP 2012-266

  • We model the factors that could influence individuals to work longer if they could trade off Social Security benefit increases in exchange for an actuarially fair lump sum once they retire.
    • This can afford people flexibility over the timing of their consumption decisions.
    • Lump sums also permit people to leave assets to their heirs.
    • Some people may wish to invest a portion of their lump sum amounts in the capital market. 
  • Offering a lump sum equivalent in expected present value to the delayed retirement credit could be cost-neutral to the system, on average.
  • Giving the delayed retirement credit as a lump sum in exchange for delayed retirement could boost average retirement ages by 1.5-2 years.
  • If older individuals worked longer voluntarily, this might enhance system solvency via additional payroll tax collections.

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