Working Paper Series

Congressional Budget Office

Washington, DC

Have People Delayed Claiming Retirement Benefits?

Responses to Changes in Social Security Rules

Jae Song

Office of Retirement and Disability Policy

Social Security Administration

E-mail: jae.song@ssa.gov

Joyce Manchester

Congressional Budget Office

E-mail: joyce.manchester@cbo.gov

 May 2008

2008-04

Working papers in this series are preliminary and are circulated to stimulate discussion

and critical comment. These papers are not subject to CBO’s formal review and editing

processes. The analysis and conclusions expressed in them are those of the authors and

should not be interpreted as those of the Congressional Budget Office or the Social

Security Administration. References in publications should be cleared with the authors.

Papers in this series can be obtained at www.cbo.gov (select Publications and then

Working Papers).

The authors are grateful to Ed DeMarco, Linda Maxfield, Susan Grad, and Bruce

Vavrichek for their support. Joyce Manchester was with the Social Security

Administration (SSA) during much of the preparation of this paper, and Chris Moore

made substantial contributions to an earlier draft of the paper as an intern at SSA. The

authors thank Ben Bridges, Kimberly Burham, Bob Dennis, Michael Leonesio, Scott

Muller, Lina Walker, and David Weaver for helpful comments; Bill Kearns and Joel

Packman for help with data; and Tom Solomon and Barbara Tyler for providing

computer resources. An earlier version of the paper was prepared for and presented at the

International Social Security Association Research Conference held in Warsaw in March

2007.
2

Summary

Two changes have been made recently to rules governing the Social Security program:

the retirement earnings test was eliminated in 2000 for people aged 65–69, and the full

retirement age (FRA) for people born in 1938 or later was scheduled to gradually

increase in two-month increments until reaching age 67. This paper examines changes in

the age at which people claim Social Security retirement benefits in response to those

changes. Data come from a 1 percent sample of administrative data from the Social

Security Administration for 1997 to 2007.

Descriptive and regression analyses show that the largest effect of eliminating the

earnings test in 2000 occurs at age 65. At that age, the proportion of people who claim

retirement benefits increases by 4.6 percentage points among men and 2.4 percentage

points among women. In addition, eliminating the earnings test significantly increases—

by more than 20 percent—the benefit entitlement hazard for those turning the FRA (that

is, the percentage of people who are newly entitled in a given year among those who are

fully insured but were not previously entitled). Moreover, the response to the gradual

increase in the FRA occurs not only among those who are close to the FRA but also

among those who are close to the early retirement age.

Introduction

Two major changes in Social Security rules recently became effective:
3

• The retirement earnings test was removed in 2000 for persons who have attained

the full retirement age (FRA) through age 69 in 2000 or later, and

• The full retirement age was set to gradually increase for those who have reached

age 62 (the early retirement age) in 2000 or later.

The FRA is the age at which 100 percent of retirement benefits is payable. Each rule

change is expected to affect the age at which people claim Social Security retirement

benefits (that is, their entitlement age) and the work behavior of older Americans.

The effectiveness of those changes largely depends on how people adjust their age at

entitlement. Eliminating the retirement earnings test is meant to encourage older people

to work so that their earnings can supplement their Social Security benefits, but how the

change affects the age at which older people claim Social Security benefits is less clear.

One of the unwanted consequences of eliminating the earnings test is that claiming

benefits at the FRA has become more attractive for those who previously claimed

benefits later than the FRA. People who claim benefits at the FRA rather than at a later

age forfeit the expected long-term increase that otherwise accrues under the program's

delayed retirement credit. At the same time, some analysts argue that eliminating the

earnings test for those who have reached the FRA through age 69 could also affect the

age at which those who are younger than the FRA claim benefits.1 If that is true, one of

the desired consequences is that those who have not attained the FRA are more likely to

continue to work and not claim benefits until they reach the FRA.

1 See Vroman (1985), Packard (1990), and Gruber and Orszag (2003).
4

Effects of raising the FRA would seem to be more straightforward at first blush. The aim

of increasing the FRA is to improve the solvency of the Social Security system by

providing stronger disincentives for claiming benefits early. What is not clear is how

people actually respond to those disincentives. To understand the effect of the rule

changes on Social Security finances and individuals’ retirement wealth, we need to

examine how people adjust the age at which they claim benefits in response to the rule

changes.

Using a 1 percent sample of administrative data from the Social Security Administration,

this paper documents and analyzes responses in the entitlement age for old-age benefits

following the recent changes in Social Security rules.2 Because the administrative data

allow us to determine the exact age at entitlement for all Social Security beneficiaries, we

can accurately document responses in benefit entitlement age before and after the rule

changes. By doing so, we expect to learn whether people have responded to changes in

Social Security rules by modifying the age at which they claim benefits, how responsive

they have been, and whether the response is concentrated only around the FRA. One of

the most interesting questions surrounding the gradual increase in the FRA is whether it

can affect the behavior of those who claim benefits close to the early retirement age.

Results of this analysis will help shed light on responses by future workers as the FRA

2 A number of studies have analyzed how incentives generated by Social Security program rules have

affected labor supply and earnings by exploring changes in the earnings test. Friedberg (2000) investigated

three changes in earnings test rules in 1978, 1983, and 1990. Results reported in Gruber and Orszag (2003)

for 1973–1998 and in Haider and Loughran (2006) for 1975–2003 are identified by all changes, including

gradual increases in the test threshold in each year. Baker and Benjamin (1999) and Disney and Tanner

(2000) examined the elimination of a similar earnings test in Canada and the United Kingdom. Song

(2003/2004) and Song and Manchester (2007) examined the 2000 change in the earnings test using Social

Security administrative data. See Krueger and Meyer (2002) for reviews of and references to other related

studies.
5

continues to rise to age 67 and, more generally, on responses to changes in retirement

incentives.

Previous studies have examined the effects of removing the earnings test in 2000, but

none of them have investigated simultaneously the effects of the gradual increase in the

FRA on earnings and entitlement to old-age benefits.3 This study investigates the effects

of both changes in program rules. We take advantage of the fact that although the change

in the earnings test in 2000 affects those who have attained the FRA through age 69 in

2000 or later, the gradual rise in the FRA affects those who reach age 62 in 2000 or later.

Since the rule changes are specific to a calendar year and different birth years, we first

identify three groups affected by the changes:

 Those affected by the gradual increase in the FRA,

 Those affected by the removal of the earnings test in 2000, and

 Those affected by both rule changes.

We then examine changes in the distribution of ages at which people claim benefits and

changes in benefit entitlement status across time and across birth cohorts. Holding age

constant, we also investigate changes in the percentage of people who are entitled to

benefits among those who are fully insured both before and after 2000. A person who is

entitled to benefits has filed a claim for and been awarded a specific type of benefit. Once

an award is made, the person usually receives an immediate payment.

3 Duggan, Singleton, and Song (2007) studied the effects of the gradual increase in the FRA using a 1

percent sample of administrative data from the Social Security Administration, but that study focused on

the effect on the rolls of the Social Security Disability Insurance program. Mastrobuoni (2006b) examines

the labor supply effects of the 1983 Social Security reforms. The budgetary impact of eliminating the

earnings test in 2000 has been examined in Mastrobuoni (2006a).
6

The remainder of this paper

• reviews recent changes in the earnings test and FRA and discusses theoretical

predictions of how people will respond to those changes,

• discusses the data and our empirical strategy,

• presents descriptive results, and

• presents regression results on the impact of the rule change on the age at benefit

entitlement.

Recent Changes in the Retirement Earnings Test and the Full

Retirement Age

Under the retirement earnings test, Social Security benefits are reduced or withheld if

earnings exceed specified threshold amounts. On April 7, 2000, major changes were

made to the earnings test when President Clinton signed into law the Senior Citizens'

Freedom to Work Act of 2000. That law eliminated the earnings test in and after the

month in which a person attains the FRA (which was then age 65). People receiving oldage benefits who have not reached the FRA remain subject to the earnings test. The

Social Security benefits of people who do not reach the FRA in the test year are reduced

by $1 for every $2 earned beyond the earnings test threshold, which was $11,520 in 2003.

Those who reach the FRA during the year are subject to a more moderate test; their

benefits are reduced $1 for every $3 earned beyond the modified threshold, which was
7

$30,720 in 2003.4 Thus, removing the earnings test in 2000 not only eliminated the test

for those who had attained ages 65 to 69 (more precisely, the FRA to 69), but it also

considerably relaxed the test for those turning the FRA (see Song and Manchester [2007]

for a more detailed description of the rule change). 5

To improve the solvency of the Social Security system, the 1983 Amendments to the

Social Security Act gradually raised the full retirement age beginning with people born in

1938 who reach the early retirement age (age 62) in 2000. The FRA is age 65 for those

born in 1937 or earlier, but it gradually increases by two-month intervals beginning with

people born in 1938 until it reaches age 67 for those born in 1960 or later.5 The FRA is

65 years and 2 months for people born in 1938, 65 and 4 months for those born in 1939,

65 and 6 months for those born in 1940, and so forth (see Social Security Administration

2007, Table 2.A17.1). Although the FRA is increasing, the age at which a person can

start receiving reduced Social Security retirement benefits remains at 62. For those who

become entitled to benefits before the FRA, monthly benefits are reduced from the full

benefit amount at the rate of five-ninths of one percent per month for the first 36 months

before the FRA and five-twelfths of one percent for any additional months. As a result,

the gradual increase in the FRA causes a gradual increase in the permanent benefit

reduction for early benefit claimants at any given age (Figure 1).6

4 See Social Security Administration (2007), Table 2.A29, for a brief history of changes in the retirement

earnings test.

5

The FRA remains at 66 for those who were born from 1942 to 1954. It gradually increases by two months

per year starting with those who were born in 1955, until it reaches 67.

6 For example, a person born in 1937 (or earlier) who claims benefits at age 62 receives 80 percent of the

primary insurance amount (PIA), but a person born in 1943 who claims benefits at age 62 receives 75

percent of the PIA (see Figure 1). Thus, the increase in the FRA can be seen as a reduction in benefit

amounts (holding all else constant) that depends on the year of birth.
8

Both rule changes could affect Social Security finances as well as individuals’ retirement

wealth. Consider the responses of people claiming benefits at ages below the FRA, at the

FRA, and above the FRA. First, those who claim benefits at ages earlier than the FRA

would experience additional declines in benefits because of the increased FRA. Second,

as pointed out in Gruber and Orszag (2003) and Song and Manchester (2007), workers

may delay claiming benefits until they reach the increased FRA in order to receive their

full benefits and avoid the earnings test. If they work longer before claiming benefits,

they will also pay Social Security taxes longer. On the cost side, even if lifetime benefits

for those who delay claiming benefits are not affected on average, the mortality

experience of those who delay claiming could affect the finances of the Social Security

trust fund if healthier people chose that option. Finally, accelerated benefit claiming

among healthier workers who have reached the FRA and no longer face the earnings test

could result in more years of benefit payments with lower levels of annual benefits.

Benefits could be lower because those workers would miss out on the delayed retirement

credit, which is discussed in more detail later.

The overall effect of the rule changes on Social Security finances depends on the

combination of workers’ decisions about how much to work and about when to claim

benefits. Although choices regarding work participation and work hours affect Social

Security revenues, responses in the age at benefit entitlement affect Social Security

expenditures as well as individuals’ retirement wealth.
9

An individual can earn a delayed retirement credit for each month benefits are not paid,

beginning with the month in which he or she reaches the FRA and ending with the month

before reaching age 70. For those who turned age 65 in 2000–2001, the credit is one-half

of one percent for each incremental month, or 6 percent per year. The marginal (yearly)

percentage increase in the delayed retirement credit for birth cohorts included in the study

is 0.5 percent for every other birth cohort until it reaches 8.0 percent for cohorts born in

1943 or later.7 The increase in the credit does not affect benefit amounts as significantly

as the two rule changes, but it might be considered to be a third change in the study

period. Interaction between the changes in the FRA and in the delayed retirement credit

could dilute the pure effect of raising the retirement age. Identifying the separate effects

of those changes, however, is left for future research.

The focus of this paper is on the effects of the changes in the rules governing the Social

Security program, but swings in economic activity, ongoing trends in labor force

participation among older workers, and other factors can also influence the age at which

people claim retirement benefits. For example, the economy was in recession during the

2001–2002 period, with the unemployment rate reaching 6.0 percent in 2003. That

recession may have made it difficult for older people to hold on to existing jobs or find

new jobs. As a result, the delays in claiming retirement benefits shown here may be

understated to some degree.

7 See Social Security Administration (2007), Table 2.A20, for historical values of the delayed retirement

credit.
10

Data and Analytical Strategy

The data used in this study come from a number of 1 percent extracts of administrative

data from the Social Security Administration, including the Continuous Work History

Sample 2004, the Master Beneficiary Record, and the Numident master file of Social

Security numbers. Those administrative data extracts contain the exact month and year of

entitlement for Old-Age, Survivors, and Disability Insurance (OASDI) benefits, the type

of benefits (primary or auxiliary), and date of birth. Therefore, the age and month at

benefit entitlement—the most important variable in this study—can be precisely derived.

Furthermore, 1 percent extracts can be easily matched across different files using

identification numbers. The 1 percent samples are selected by a “stratified cluster design”

based on certain serial digits of the Social Security number. They are generally

considered to be random samples and contain a large number of observations that

represent the general population.

The Continuous Work History Sample (CWHS) is an analytical master file for the 1

percent sample of all Social Security numbers ever issued and is the base data set used in

this analysis. The file is derived from several administrative master files, including the

Master Beneficiary Record and the Master Earnings File, to support research and

statistical analysis of the Social Security programs. The CWHS contains information on

each individual’s demographic characteristics, longitudinal earnings (annual earnings

from 1951 to 1977 covered by Social Security and total annual earnings from 1978 to the

present), status of entitlement to OASDI benefits, and information related to death (if

any).
11

The CWHS has both an active and an inactive file. The active file includes workers who

have ever reported earnings from employment. Before 1978, the CWHS tracked only

earnings covered by Social Security. Starting in 1978, however, the CWHS was extended

to include earnings not covered by Social Security. The inactive sample includes people

who never worked. By combining the active and inactive files, we can analyze the

earnings of our 1 percent sample of the U.S. population with valid Social Security

numbers and their participation in the OASDI program.

The semiannual Master Beneficiary Record (MBR) extract contains data related to the

administration of the OASDI program, such as application and entitlement dates, benefit

amounts, payment status, type of benefits, and demographic information. An MBR record

is established whenever an individual application for benefits is processed. The MBR has

one record for each primary beneficiary (the worker on whose earnings the benefit

entitlement exists). However, each MBR record can contain more than one beneficiary.

Lastly, we merged our base data set with a 1 percent extract of the Numident file. The

Numident is a master file of assigned Social Security numbers that contains birth and

death dates, place of birth, race, and sex.8 Information on date of death permits us to

eliminate people in the sample who died. Thus, our sample includes only those who are

alive at the end of each reference year.

8 For further discussion of the Social Security Administration’s administrative files, see Panis and others

(2000).
12

Investigating how changes in the rules affect age at entitlement requires a data source

with precise information on age, month and year of birth, and month and year of

entitlement. The elimination of the retirement earnings test affects people from age 65 (or

the FRA) to age 69. In a given year, anyone older than age 69 or younger than the full

retirement age will not be affected directly by the elimination of the retirement earnings

test. However, because the FRA gradually increases by two-month intervals, the year in

which a person becomes affected by the test’s elimination depends not only on the year in

which they were born but also on the month in which they were born. For example,

someone born in November or December 1939 would reach the FRA not in 2004 but in

2005. Yet someone born in January through October 1939 would reach the FRA in 2004.

Only the year of birth, however, determines who is affected by the increase in the FRA.

Although removing the earnings test in 2000 was a relatively abrupt change in a

parameter of the Social Security program, the gradual increase in the FRA was

anticipated for many years following the enactment of the 1983 amendments. The earliest

birth cohort affected by those amendments reached their FRA in 2003 or 2004. Thus, a

forward-looking individual would have adjusted his or her labor supply over the last 20

years to compensate for the expected benefit reduction due to the increase in the FRA.

Unlike ongoing decisions about labor supply, workers can claim benefits only after

reaching the early retirement age. Thus, the standard before-and-after or difference-indifference approach is valid in evaluating the effect of the 1983 amendments on the age

at which benefits are claimed. Note, however, that larger compensating adjustments in

labor supply result in smaller estimated effects on the age at benefit entitlement.
13

The fact that the "treatment" in this study depends on both time and age suggests a quasiexperimental study using a standard design. This analysis therefore relies primarily on

comparing the probability of benefit entitlement and entitlement hazards over the period

before and after the rule changes became effective, holding age constant. Entitlement

hazard refers to the probability that people who have not yet claimed benefits will do so

during the specified period.

Three distinct treatment groups emerge from the rule changes (Figure 2).

• The first treatment group is affected only by the 2000 change in the earnings test.

It comprises people who were born in 1930–1935, 1931–1936, 1932–1937,

1933–1937, 1934–1937, and 1935–1937, respectively, for 2000, 2001, 2002,

2003, 2004, and 2005.

• The second treatment group is affected by both the 2000 change in the earnings

test and the increase in the FRA. It comprises people who were born in January

through October 1938, January 1938 through August 1939, and January 1938

through June 1940, respectively, for 2003, 2004, and 2005.

• The third treatment group, which consists of people who were born in 1938 or

later for years before attaining the FRA, is affected only by the increase in the

FRA. In 2000, for example, the 1938 cohort would not be directly affected by the

change in the earnings test because they were too young in that year.9

9 We note, however, that they may be indirectly affected (for example, if the repeal of the earnings test at

the FRA affected their decisions about claiming benefits before the FRA).
14

Descriptive Analysis

An Overview of the 1 Percent Sample

For 1997 through 2006, year-end counts of Old-Age and Survivors Insurance (OASI)

beneficiaries and persons who are fully insured (as of age 60) provide a good overview of

the 1 percent data (Table 1). In our 1 percent sample, 24,524 men and 21,797 women

aged 62–64 in 2000 are fully insured.10 Only 292 of the 10,374 auxiliary beneficiaries in

that age group in 2000 are male. Although the number of women who are auxiliary

beneficiaries tends to drop significantly over the study period, the number of men in that

category appears to remain relatively stable. Primary beneficiaries include individuals

who claim benefits as dual beneficiaries—those receiving both a primary benefit and a

partial spouse or survivor benefit. Although primary beneficiaries include dual

beneficiaries, the reduction factors for the spouse and survivor portion of benefits are

different from those for primary benefits, and the FRA increase for survivor benefits has

a different schedule from that for primary or spouse benefits (Social Security

Administration 2007, Tables 2.A21 and 2.A22).

The percentage of people who are fully insured and become primary beneficiaries before

age 65 remains relatively constant until 1999 and then gradually decreases over the rest

of the study period. Because those born in 1938 reach age 62 in 2000, the gradual

decrease in the percentage of primary beneficiaries probably stems in large part from a

delay in benefit claiming among those born in 1938 or later. Declines in the percentage of

primary beneficiaries beginning in 2003 seem plausible because 2003 is the first year in

10 Throughout the rest of this paper, we define age to be reference year minus year of birth. People who are

fully insured have enough quarters of coverage to be eligible for old-age benefits as primary beneficiaries.
15

which those aged 65 face the higher FRA. A part of the gradual decline, known as the

spillover effect associated with the removal of the earnings test, may be attributed to

individuals aged 62–64 who continue to work and delay claiming benefits until they

reach age 65 following the test’s removal. Of course, that effect is unlikely to be as large

as the direct effect of the rising FRA.

Among people aged 65–70, the percentage of primary beneficiaries increases over the

2000–2002 period and then gradually declines over the rest of the study period.

Responses to removing the earnings test in 2000 and raising the FRA are evident here.

The percentage of male primary beneficiaries drops from 96 percent to 95 percent

between 2003 and 2004, followed by a decline from 95 percent to 93.6 percent between

2004 and 2005. The percentage of female primary beneficiaries also drops during both

time intervals, but fairly insignificantly (less than 1 percentage point). One notable

finding is that the drops for both men and women come at the same time that the increase

in the FRA begins to affect them directly. Smaller declines for women may reflect lower

responses among auxiliary beneficiaries, such as spouses and widows.

Eliminating the retirement earnings test also appears to affect the share of fully insured

individuals who have claimed benefits as primary beneficiaries (Table 1). Among men

aged 65–70, 94.5 percent of the fully insured are primary beneficiaries in 1999. In 2000,

immediately after the earnings test was removed, that percentage rises nearly 3

percentage points, to 97 percent. The share of female primary beneficiaries also increases

more than 1 percentage point, to 86 percent.
16

The rest of our analysis focuses exclusively on primary beneficiaries because their

benefit-claiming behavior has the biggest effect on households’ Social Security benefits.

Primary worker beneficiaries are the largest group among OASI beneficiaries; they

constituted approximately 75 percent of all OASI beneficiaries in 2002 (Social Security

Administration 2007). Only people aged 62 or older can claim benefits as primary

beneficiaries, so we do not include those younger than age 62 in the analysis. In addition,

we limit our sample to individuals who have accumulated enough quarters of coverage to

be fully insured between the year they turn age 21 and the year they reach age 60. Our

analytical samples also exclude people who were ever beneficiaries under the Social

Security Disability Insurance program and OASI beneficiaries who converted from the

Disability Insurance program.

Percentage of Primary Beneficiaries in Each Treatment Group

Our empirical strategy is to trace the number and the percentage of primary beneficiaries

among the fully insured population from 1997 to 2006, holding age constant. Data on the

population that is fully insured as of age 60 can be found in Table 2 and Figure 3.

Entitlement Probability. For both men and women, the percentage aged 65–69 who are

entitled as primary beneficiaries increases between 1999 and 2000. Over the same period,

the percentage aged 62 decreases slightly. Such results show that after the change in the

earnings test in 2000, benefit claiming among people who had already attained the FRA

accelerated at the same time that it slowed down a bit among those younger than the
17

FRA. The slowdown is particularly apparent among those turning age 62. In 2003, when

the first birth cohort that faces an increased FRA begins to reach their FRA (age 65 and 2

months), the overall percentage entitled begins to decrease, particularly among those

aged 65. The decline continues in 2005 and 2006. For those who are younger than age 65,

the percentage entitled decreases slightly over the 2003–2006 period, suggesting that a

small fraction of those younger than the FRA responded to the FRA rule change as well.

Responses to the rule changes discussed above probably understate the effect on people

who can choose whether to become entitled to benefits. The reason for the

understatement is that the number of people who have not yet claimed benefits in each

age/year group is fairly small. Nearly 90 percent of fully insured people become entitled

by age 65 (Table 2).

Entitlement Hazard. We next focus on the percentage of people who are newly entitled

in a given year, among those who are fully insured but not previously entitled (Table 3

and Figure 4). That measure is known as the entitlement hazard. For example, 19.7

percent of men aged 69 who were not yet entitled became entitled in 1999, compared

with 41.8 percent in 2000. Furthermore, 32.3 percent of men aged 66 who were not yet

entitled became entitled in 1999, compared with 65.9 percent in 2000. For men and

women aged 65, the entitlement hazards decline noticeably starting in 2003, when the

first birth cohorts are affected by the FRA increase. The entitlement hazards for those

aged 66 increase nearly 40 percentage points for both men and women in 2004 when
18

those born in November or December 1938 reach their FRA. Those results also show that

men are more responsive to the rule changes than are women.

Entitlement Age Distribution by Entitlement Year and Birth Year

We next present the distribution of benefit entitlement ages by entitlement year and birth

cohort (Figures 5, 6, and 7). Comparing the distribution across different entitlement years

and different birth cohorts provides data on the changes in claiming behavior as both rule

changes become effective.

Cumulative distributions by year of entitlement in Figure 5 show the percentage of fully

insured people who have claimed benefits as of a specific age in each year from 1997 to

2006. The analysis focuses on people aged 62–70 because the percentage of those who

become entitled by age 70 tends to be stable before and after the rule changes. Several

interesting aspects are evident. First, the distribution of men shifts more than that of

women, suggesting that men are more responsive to the rule changes than are women.

Second, in the years after the earnings test was removed, the curves shift downward for

ages 62–65. They jump up at age 65 and then exhibit a stair-step incline as the FRA rises,

indicating that the removal of the earnings test has a slight effect on the age at which

those who are younger than the FRA become entitled. Third, gradual downward shifts in

the curves in the segment for people at entitlement age 65 or older appear to be a result of

the gradual increase in the FRA for those born in 1938 or later. Fourth, the curves of

2000 through 2006, particularly for those at the segment younger than the entitlement age
19

of 65, are tightly packed, perhaps reflecting both the additional benefit reduction as the

FRA increases and the absence of an earnings test starting at the FRA.

Next we present a cumulative distribution of benefit entitlement ages for men and women

for birth cohorts 1930, 1937, 1939, and 1941 (Figure 6). In this case, we include

entitlement ages ranging from age 62 to age 65 and 8 months because the last birth cohort

considered here (1941) reaches age 65 and 8 months—the FRA for that cohort—by the

end of August 2007. Because our most recent MBR extract was pulled in December

2007, we are able to observe those who become entitled at ages up to 65 and 8 months for

all birth cohorts considered in Figure 6. Persons born in 1934 or earlier who claimed

benefits before reaching age 65 did so before the removal of the earnings test in 2000.

Thus, the distribution of entitlement ages of the 1930 birth cohort should be relatively

unaffected by both rule changes. For the 1937 birth cohort, benefit claiming at ages 63 or

older takes place after the elimination of the earnings test. The curve of the 1930 birth

cohort clearly lies above the curve of the 1937 birth cohort. For all cohorts, nearly 95

percent of primary beneficiaries claim benefits by the FRA. Further, the elimination of

the earnings test appears to accelerate benefit claims at age 65. Thus, the vertical distance

at age 65 between the curves of the 1930 and 1937 birth cohorts probably arises from

accelerated benefit claims at age 65, which was the FRA for those birth cohorts.

Although approximately 98 percent of men born in 1930 become entitled by age 65,

nearly 99 percent of those born in 1937 become entitled by age 65, probably because of

the effect of the removal of the earnings test in 2000. Similar effects are observable

among women, but the magnitude appears to be a bit smaller.
20

The effects of the increase in the FRA are reflected in the horizontal dispersion in the

vertical segments of the cumulative distribution curves for ages 65 and 65 and 8 months.

It is well known that two peaks occur in the entitlement age distribution: one at the early

retirement age (62) and the other at the FRA. Results here show that the peak at the FRA

moves as the FRA increases. Furthermore, results show that the portion of the curve for

those aged 62–64 keeps moving downward for more recent birth cohorts. One of the most

important questions for policymakers is who is responding to the increase in the FRA.

Are those observed responses largely due to changes in claiming behavior among those

who would become entitled around the FRA or across different ages? The answer is

unclear from the graphical results alone.

Sorting out the economic effects of the benefit reductions from the signaling or

institutional role of the FRA is a difficult task, but the information in Figure 7 may offer

some clues. That figure shows the proportion of men and women among the cohorts born

in 1937 through 1941 who become entitled to retirement benefits at two-month intervals

between ages 62 and 65 and 8 months. The 1937 birth cohort was not affected by the

change in the full retirement age. About 42 percent of men in that cohort and 49 percent

of women claimed benefits at age 62, the early retirement age. That percentage dropped

slightly following the increase in the FRA, to about 40 percent of men and 45 percent of

women in the 1941 cohort. The percentage of people who claim benefits after age 62 and

a few months before the FRA stays relatively stable at about 1 percent at each age.
21

Benefit reductions affect only people who retire before age 65 and therefore are primarily

responsible for the drop in the percentage who claim benefits before age 65.

More dramatic changes are evident in the upper end of the distribution. In the 1937

cohort, about 18 percent of men and 12 percent of women claimed benefits at age 65, the

FRA for that cohort. As the FRA moved out by two months per year for the 1938, 1939,

1940, and 1941 cohorts, the spike at the FRA moved out as well. About 16 percent of

men and 10 percent of women became entitled to benefits at 65 and 8 months, the

relevant FRA for the 1941 cohort. People who previously would have claimed benefits at

age 65 but waited until their new, higher FRA are most likely responding to a

combination of the benefit reduction and the signaling aspect of the Social Security

retirement age. Another possibility is that the “full” retirement age in integrated private

pension plans influences the age at which people claim Social Security benefits. Further

investigation will help identify those two effects more clearly.

Regression Analysis of Benefit Entitlement Status at Specific

Ages

In this study, the range of age groups affected by the changes in law differs over the study

period. For example, people affected only by the removal of the earnings test in 2000

reach ages 65–70 in 2000, but the group affected only by the earnings test removal in

2005 reaches ages 68–70 in 2005. People reaching age 65 and 6 months through age 67

in 2005 are affected by both the removal of the earnings test and the gradual increase in

the FRA. Further, those affected by the gradual increase in the FRA in 2000 turn age 62
22

in 2000, but the affected group in 2002 reaches ages 62–64 in that year. Therefore,

estimating a single regression equation based on stacked (repeated) cross-sectional data

cannot clearly identify the effects of the rule changes.

A better approach is to estimate the effect of the rule changes on the probability of benefit

entitlement at specific ages using a probit regression method. The dependent variable is

binary: 1 if the person is entitled to old-age benefits in the reference year, and 0 if the

person is not entitled to benefits in that year. The regression equation takes a standard

difference-in-difference form:

' j jj j

it t ti it y = + Δ+ Δ+ Δ+ + a g h cX β e ,

where y is the dependent variable that equals 1 when the person is entitled in year t and

0 when the person is not entitled in year t ; Δs are dummy variables indicating the type of

rule change affecting different age groups in different years; index j takes the value 0 or

j, where j indicates the jth treatment group and 0 indicates the control group; time index t

equals year of entitlement; and X is a vector of the individual’s characteristics, such as

race and sex.

Effects of the removal of the earnings test and the increase in the FRA are identified by

the β s that are the coefficients on the year- and age-specific treatment dummies. Because

the probability of benefit entitlement monotonically increases as age rises, one cannot

estimate all β s with one regression. Thus, we further subdivide the affected group into

seven subgroups according to age (Figure 2). We then estimate the effect of the rule

changes in the seven separate regressions using the age 71–72 group as the control group.
23

For example, the first regression includes people who reach ages 68–70 in each reference

year as treatment group 1 and those who reach ages 71–72 as the control group.

Similarly, the seventh regression includes those who reach age 62 as the treatment group

and those who reach ages 71–72 as the control group.

Persons aged 71–72 appear to be an excellent control group for the analysis. As shown in

Table 2 and Figure 3, observed (cumulative) benefit entitlement rates at ages 70 or older

are largely independent of the two rule changes. The rule changes affect the shape of the

age distribution at entitlement between ages 62 and the FRA (or age 70) but probably do

not affect the cumulative probability of entitlement at ages 71 and 72.11

In Table 4, we report estimates of the full effects on entitlement and the marginal effects

on the probability of entitlement of year- and age-specific treatment dummies for men

and women separately. Including year- and age-specific treatment dummies rather than

only age-specific treatment dummies allows us to investigate the dynamics of benefit

claiming at specific ages over the 2000–2005 period. The first two columns show the

coefficient estimates and clustered robust standard errors on age interacted with year (the

rule change dummies) for men. The third and fourth columns report the marginal effect

evaluated at the mean of the independent variable and standard errors for men. In the last

four columns, we report estimated effects and marginal effects for women.

11 We have tested two alternative control groups: those who are not fully insured and auxiliary

beneficiaries. Those results tend to overestimate effects for older age groups and underestimate effects for

younger age groups.
24

Both the direction and the magnitude of the estimated effects accord with our

expectations. For men aged 68–70, we estimate that benefit entitlement in 2000–2005

rises approximately 1 percentage point as a result of eliminating the earnings test in 2000.

The effects are a bit larger for those aged 66, about 3 percentage points for men and less

than 2 percentage points for women. In 2005, estimated effects are smaller for men and

women aged 66 and 67, suggesting that the change in the FRA offsets the effect from the

change in the earnings test. For those aged 65 in 2000–2002, the change in the earnings

test increases benefit entitlement by 4.6 percentage points for men and by 2.4 percentage

points for women. The FRA becomes the dominant rule change in 2004 and 2005,

however, as the estimated marginal effect for those aged 65 turns negative and becomes

as large as 12.5 percentage points for men and 5.4 percentage points for women in 2005.

Estimated policy effects for persons aged 64 in 2000–2001 and those aged 63 in 2000 are

small and, for the most part, statistically insignificant. Such results are plausible because

those age groups are not affected directly by the two rule changes (see Figure 2). Yet

estimated effects are all negative and quite large for persons aged 62–64 in other years. A

four-month increase in the FRA results in a decline in benefit entitlement rates for men of

1.7, 2.4, and 3.7 percentage points at ages 62, 63, and 64, respectively. For women the

declines are 1.5, 2.2, and 2.7 percentage points at ages 62, 63, and 64, respectively.

Following the six-month increase in the FRA, rates for men decline by 3.3, 4.4, and 5.2

percentage points at ages 62, 63, and 64, respectively, and by 2.1, 3.3, and 3.5 percentage

points for women at those same ages. Those estimates suggest that a relatively large
25

response occurs at age 62 and that relatively small but incremental responses occur at

ages 63 and 64.

Policymakers have asked whether people who are younger than the FRA would change

their behavior following the gradual increase in the FRA. Our results show that the

largest response occurs among those who are at the early retirement age of 62. Additional

small but statistically significant responses are detected at ages 63 and 64 as well.

Estimates reported in Table 5 show how the two rule changes have affected the benefit

entitlement hazard. Among those who have reached the FRA, a dramatic increase in the

entitlement hazard occurs right after the change in the earnings test, as shown in Figure 4.

The estimated marginal effects in 2000 for those aged 66 or older range from 18

percentage points (ages 68–70) to 29 percentage points (age 65) for men and 10

percentage points (ages 68–70) to 25 percentage points (age 65) for women. In the

succeeding years the marginal effects are small and insignificant except for those at age

65. As expected, the entitlement hazard also increases significantly for those aged 66,

rising 19 and 33 percentage points for men in 2004 and 2005, respectively, and 14 and 26

percentage points for women. Persons born in November–December 1938 reach the FRA

(65 years and 2 months) in 2004, and those born in September–December 1939 reach the

FRA (65 and 4 months) in 2005.

Effects of removing the earnings test in 2000 are reflected in estimates of the entitlement

hazard for those aged 65 in 2000–2002. Estimated marginal effects in those years for men
26

and women are approximately 26 percent to 29 percent and 21 percent to 24 percent,

respectively. Starting in 2003, that age group is affected not only by the removal of the

earnings test but also by the gradual increase in the FRA. The estimated marginal effect

at age 65 is small and statistically insignificant in 2003 but is negative and statistically

significant in both 2004 and 2005, indicating that the effects of the gradual increase in the

FRA dominate in those years. Estimated marginal effects in 2000–2003 are relatively

small for those younger than age 65. However, the marginal effects for those aged 62–64

in 2004 and 2005 are negative, relatively large, and statistically significant.

We can easily derive elasticity estimates of interest from the estimates reported in Table

4. If all else remains constant, we know the percentage change in benefit amounts for all

age groups affected by the gradual increase in the FRA. We can calculate the elasticity of

benefit entitlement probability with respect to benefit amounts using our estimates on

percentage changes in benefit entitlement probability by age group. The derived elasticity

at age 64 ranges from 1.3 to 1.7 for men and from 0.7 to 1.1 for women. At age 62 it

ranges from 0.8 to 1.3 for men and 0.7 to 1.2 for women. The larger elasticity at age 64

than at age 62 is plausible because the estimated effects at age 64 cumulate the effects at

ages 62, 63, and 64.
27

References

Baker, Michael, and Dwayne Benjamin. 1999. How do retirement tests affect the labour

supply of older men? Journal of Public Economics 71(1): 27–52.

Disney, Richard, and Sarah Tanner. 2002. The labour supply effect of the abolition of the

earnings rule for older workers in the United Kingdom. Economic Journal 112(478):

c136–c152.

Duggan, Mark, Perry Singleton, and Jae G. Song. 2007. Aching to retire? The rise in the

full retirement age and its impact on the disability rolls. Journal of Public Economics

91(7–8): 1327–1350.

Friedberg, Leora. 2000. The labor supply effects of the Social Security earnings test.

Review of Economics and Statistics 82(1): 48–63.

Gruber, J., and P. Orszag. 2003. Does the earnings test affect labor supply and benefit

receipt? National Tax Journal 56: 755–773.

Haider, S.J., and D.S. Loughran. 2006. Do the elderly respond to taxes on earnings?

Evidence from the Social Security retirement earnings test. Working paper.

www.msu.edu/~haider/Research/haiderloughran-july06.pdf.

Krueger, A.B., and B.D. Meyer. 2002. Labor supply effects of social insurance. In A.

Auerbach and M. Feldstein, eds. Handbook of Public Economics 4: 1–34. Amsterdam:

North-Holland.

Mastrobuoni, Giovanni. 2006a. Labor supply effects of the recent Social Security benefit

cuts: Empirical estimates using cohort discontinuities. Collegio Carlo Alberto Working

Paper No. 33, www.carloalberto.org/files/no.33.pdf.

———. 2006b. The social security earnings test removal: Money saved or money spent

by the trust fund? Collegio Carlo Alberto Working Paper No. 25,

www.carloalberto.org/files/no.25.pdf.

Packard, Michael D. 1990. The earnings test and the short-run work response to its

elimination. Social Security Bulletin 53(9): 2–16.

Panis, Constantijn, Ronald Euller, Cynthia Grant, Melissa Bradley, Christine E. Peterson,

Randall Hirscher, and Paul Stinberg. 2000. SSA Program Data User’s Manual.

Baltimore, MD: Social Security Administration.

Social Security Administration. 2007. Annual Statistical Supplement to the Social

Security Bulletin, 2006. Washington, DC: Office of Policy.
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Song, Jae G. 2003/2004. Evaluating the initial impact of the elimination of the retirement

earnings test. Social Security Bulletin 65(1): 1–15.

Song, Jae G., and Joyce Manchester. 2007. New evidence on earnings and benefit claims

following changes in the retirement earnings test in 2000. Journal of Public Economics

91(3–4): 669–700.

Vroman, Wayne. 1985. Some economic effects of the Social Security retirement earnings

test. In Ronald Ehrenberg, ed. Research in Labor Economics. Greenwich, CT: JAI Press,

pp. 31–89.
Table 1.

Status of Entitlement to Old-Age and Survivors Insurance Benefits for People Aged 62-70 in 1997-2006

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Men

Fully Insured 23,154 23,661 24,069 24,524 25,058 25,968 26,699 28,788 31,166 33,050Primary Beneficiaries

Number 12,778 12,933 13,190 13,257 13,279 13,383 13,304 13,819 14,539 14,595Percentage of fully insured 0.5519 0.5466 0.5480 0.5406 0.5299 0.5154 0.4983 0.4800 0.4665 0.4416

Auxiliary Beneficiaries

Number 321 292 300 292 294 291 306 328 370 328Percentage of primary beneficiaries 0.0251 0.0226 0.0227 0.0220 0.0221 0.0217 0.0230 0.0237 0.0254 0.0099

Women

Fully Insured 19,910 20,358 20,867 21,797 22,406 23,235 24,094 26,345 28,416 29,954Primary Beneficiaries

Number 10,888 11,138 11,375 11,875 12,051 12,215 12,319 13,174 13,940 14,223Percentage of fully insured 0.5469 0.5471 0.5451 0.5448 0.5378 0.5257 0.5113 0.5001 0.4906 0.4748

Auxiliary Beneficiaries

Number 10,239 10,193 10,194 10,082 9,881 9,369 9,072 9,044 8,987 5,910Percentage of primary beneficiaries 0.9404 0.9152 0.8962 0.8490 0.8199 0.7670 0.7364 0.6865 0.6447 0.1973

Year of Birth Sample 1933-1935 1934-1936 1935-1937 1936-1938 1937-1939 1938-1940 1939-1941 1940-1942 1941-1943 1942-1944

Men

Fully Insured 43,660 43,068 42,876 43,058 43,172 43,621 44,592 45,658 47,274 49,194Primary Beneficiaries

Number 41,372 40,660 40,521 41,739 41,899 42,321 42,868 43,376 44,267 45,500Percentage of fully insured 0.9476 0.9441 0.9451 0.9694 0.9705 0.9702 0.9613 0.9500 0.9364 0.9249

Auxiliary Beneficiaries

Number 891 881 874 862 860 852 846 841 868 955Percentage of primary beneficiaries 0.0215 0.0217 0.0216 0.0207 0.0205 0.0201 0.0197 0.0194 0.0196 0.0194

Women

Fully Insured 38,126 38,090 38,231 38,344 38,427 38,991 40,044 41,113 42,634 44,801Primary Beneficiaries

Number 31,896 31,928 32,244 32,933 33,214 33,771 34,735 35,499 36,709 38,333Percentage of fully insured 0.8366 0.8382 0.8434 0.8589 0.8643 0.8661 0.8674 0.8634 0.8610 0.8556

Auxiliary Beneficiaries

Number 28,606 28,517 28,365 28,289 27,730 27,466 27,069 26,530 26,091 23,871Percentage of primary beneficiaries 0.8969 0.8932 0.8797 0.8590 0.8349 0.8133 0.7793 0.7473 0.7108 0.5328

Year of Birth Sample 1927-1932 1928-1933 1929-1934 1930-1935 1931-1936 1932-1937 1933-1938 1934-1939 1935-1940 1942-1944

Ages 62-64Ages 65-70

SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999-2007. NOTE: Dual beneficiaries are counted in both primary and auxiliary beneficiary categories. 
30

Table 2.Number and Percentage of Beneficiaries by the End of Each Year, by Birth Year Birth Year Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women

1927 6,928 5,1931928 6,909 5,184 6,782 5,2391929 6,884 5,290 6,764 5,260 6,686 5,3111930 7,104 5,495 7,000 5,468 6,924 5,427 6,838 5,4891931 6,838 5,427 6,754 5,427 6,694 5,431 6,682 5,416 6,528 5,4671932 6,709 5,307 6,773 5,362 6,777 5,372 6,806 5,413 6,695 5,365 6,537 5,3901933 4,826 3,969 6,587 5,172 6,728 5,259 6,877 5,350 6,766 5,327 6,657 5,293 6,527 5,3711934 4,433 3,874 4,869 4,211 6,712 5,444 7,051 5,582 6,963 5,563 6,846 5,515 6,720 5,489 6,591 5,5031935 3,519 3,045 4,581 3,857 5,041 4,221 7,485 5,683 7,451 5,669 7,345 5,645 7,235 5,623 7,115 5,617 7,036 5,7051936 3,483 3,070 4,581 3,934 5,065 4,293 7,496 5,823 7,448 5,822 7,365 5,807 7,256 5,798 7,196 5,800 7,219 5,9411937 3,568 3,220 4,598 4,127 5,037 4,516 7,488 6,106 7,456 6,123 7,385 6,113 7,321 6,127 7,335 6,1761938 3,594 3,455 4,708 4,349 5,184 4,723 7,565 6,322 7,892 6,565 7,866 6,596 7,896 6,6471939 3,534 3,185 4,642 4,104 5,087 4,510 7,137 5,902 7,932 6,428 7,994 6,4951940 3,557 3,387 4,664 4,312 5,164 4,746 6,916 6,052 8,293 6,9371941 3,553 3,496 4,739 4,474 5,273 4,968 6,763 6,1371942 3,916 3,954 5,254 5,177 5,882 5,7061943 4,012 3,794 5,273 4,9861944 3,440 3,5311927 0.9778 0.86801928 0.9636 0.8405 0.9740 0.86281929 0.9574 0.8444 0.9637 0.8514 0.9758 0.87151930 0.9446 0.8297 0.9520 0.8360 0.9613 0.8427 0.9756 0.86521931 0.9301 0.8334 0.9417 0.8438 0.9526 0.8545 0.9712 0.8679 0.9746 0.88911932 0.9138 0.8071 0.9354 0.8244 0.9493 0.8355 0.9727 0.8527 0.9762 0.8592 0.9777 0.87741933 0.6503 0.6181 0.8999 0.8128 0.9313 0.8336 0.9702 0.8550 0.9745 0.8606 0.9777 0.8670 0.9794 0.89091934 0.5805 0.5775 0.6464 0.6326 0.9032 0.8246 0.9659 0.8556 0.9714 0.8615 0.9734 0.8644 0.9752 0.8724 0.9777 0.88831935 0.4346 0.4490 0.5727 0.5728 0.6377 0.6317 0.9616 0.8570 0.9698 0.8635 0.9721 0.8689 0.9738 0.8742 0.9753 0.8822 0.9778 0.90501936 0.4284 0.4406 0.5697 0.5690 0.6381 0.6248 0.9583 0.8536 0.9674 0.8614 0.9718 0.8684 0.9741 0.8757 0.9761 0.8829 0.9794 0.90441937 0.4392 0.4429 0.5724 0.5716 0.6347 0.6297 0.9553 0.8592 0.9648 0.8678 0.9698 0.8754 0.9721 0.8825 0.9744 0.88941938 0.4202 0.4484 0.5546 0.5686 0.6178 0.6214 0.9114 0.8376 0.9624 0.8771 0.9669 0.8853 0.9707 0.89211939 0.4094 0.4199 0.5433 0.5429 0.6017 0.6005 0.8539 0.7909 0.9575 0.8657 0.9651 0.87491940 0.3938 0.4195 0.5222 0.5368 0.5851 0.5944 0.7899 0.7620 0.9480 0.87491941 0.3816 0.4089 0.5148 0.5258 0.5770 0.5861 0.7407 0.72341942 0.3640 0.4013 0.4910 0.5272 0.5500 0.58111943 0.3542 0.3749 0.4659 0.49331944 0.3116 0.3521

2004 2005 2006

Number Who Are Entitled During Year

Percentage Who Are Entitled During Year

1997 1998 1999 2000 2001 2002 2003

SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999-2007. 
31

Table 3. Number and Percentage of People Who Become Entitled in Each Year, by Birth Year and SexBirth Year Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women

1928 75 471929 47 20 81 541930 56 23 67 25 103 541931 83 47 79 43 132 51 23 391932 158 99 100 46 165 81 24 16 9 341933 1,806 1,083 230 107 276 116 29 12 21 11 13 271934 498 357 1,894 1,108 459 181 37 17 16 9 14 14 15 241935 1,097 813 523 381 2,515 1,345 58 28 17 19 11 2 11 15 12 321936 3,456 3,008 1,138 863 550 370 2,491 1,416 68 30 34 24 18 10 15 12 31 311937 3,546 3,152 1,073 912 511 401 2,509 1,478 69 39 41 17 17 9 25 171938 3,566 3,377 1,137 899 541 390 2,430 1,487 419 239 38 30 42 251939 3,507 3,105 1,155 910 507 418 2,111 1,309 853 479 96 571940 3,536 3,308 1,151 931 559 450 1,795 1,233 1,485 8621941 3,530 3,436 1,232 978 577 498 1,508 1,1231942 3,882 3,862 1,347 1,213 654 5571943 3,982 3,732 1,354 1,2571944 3,417 3,4971928 0.3012 0.14921929 0.1604 0.0683 0.3361 0.20221930 0.1393 0.0599 0.1971 0.0702 0.3829 0.16881931 0.1711 0.1199 0.1990 0.1280 0.4177 0.1783 0.1278 0.16961932 0.2577 0.2041 0.2217 0.1217 0.4783 0.2477 0.1348 0.0664 0.0596 0.15321933 0.7152 0.6760 0.3226 0.2432 0.5823 0.3580 0.1472 0.0594 0.1273 0.0595 0.0909 0.15701934 0.1591 0.1747 0.7273 0.6798 0.6585 0.4151 0.1581 0.0680 0.0821 0.0388 0.0791 0.0639 0.0932 0.11761935 0.2450 0.2705 0.1561 0.1807 0.8976 0.8059 0.2094 0.1134 0.0787 0.0880 0.0564 0.0103 0.0608 0.0785 0.0723 0.18501936 0.4277 0.4794 0.2491 0.2808 0.1623 0.1732 0.8874 0.8237 0.2194 0.1310 0.1429 0.1212 0.0891 0.0585 0.0820 0.0750 0.1761 0.20671937 0.4389 0.4775 0.2395 0.2807 0.1513 0.1782 0.8825 0.8257 0.2136 0.1660 0.1621 0.0890 0.0806 0.0523 0.1225 0.10121938 0.4196 0.4795 0.2326 0.2589 0.1457 0.1563 0.7712 0.7243 0.5877 0.5000 0.1297 0.1266 0.1567 0.11261939 0.4086 0.4509 0.2298 0.2536 0.1318 0.1603 0.6378 0.6114 0.7174 0.6311 0.2581 0.19661940 0.3932 0.4462 0.2133 0.2359 0.1332 0.1535 0.4963 0.5080 0.7698 0.71891941 0.3813 0.4358 0.2180 0.2290 0.1311 0.1554 0.3924 0.41421942 0.3631 0.4224 0.1996 0.2370 0.1207 0.14341943 0.3536 0.3976 0.1842 0.22521944 0.3116 0.3704

2005 2006

Number Who Become Entitled During Year

Percentage Who Are Fully Insured but Not Beneficiaries at the Beginning of Each Year

1998 1999 2000 2001 2002 2003 2004

SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number for December 1999-2007.
Table 4. 

Marginal Effects on Benefit Entitlement, by Age and Sex

Year Policy Effect Estimate Std. E. Marg. Eff. Std. E. Estimate Std. E. Marg. Eff. Std. E.

2000 RET 0.1279 0.0238 0.0112 0.0019 0.0388 0.0202 0.0063 0.0032

2001 RET 0.1611 0.0272 0.0137 0.0020 0.0737 0.0227 0.0117 0.0035

2002 RET 0.1618 0.0279 0.0138 0.0021 0.0513 0.0221 0.0083 0.0035

2003 RET 0.1283 0.0273 0.0112 0.0022 0.0661 0.0210 0.0106 0.0032

2004 RET 0.1044 0.0268 0.0093 0.0022 0.0602 0.0204 0.0097 0.0032

2005 RET 0.0720 0.0267 0.0066 0.0023 0.0759 0.0205 0.0120 0.0031

2000 RET 0.2856 0.0355 0.0275 0.0027 0.0760 0.0258 0.0109 0.0035

2001 RET 0.3056 0.0368 0.0290 0.0027 0.1044 0.0281 0.0147 0.0037

2002 RET 0.2924 0.0369 0.0280 0.0028 0.1153 0.0296 0.0161 0.0038

2003 RET 0.2640 0.0369 0.0259 0.0029 0.0804 0.0295 0.0115 0.0040

2004 RET 0.2062 0.0358 0.0211 0.0031 0.0930 0.0283 0.0132 0.0038

2005 RET&FRA (2 mos) 0.1372 0.0340 0.0148 0.0033 0.1179 0.0267 0.0165 0.0035

2000 RET 0.3343 0.0336 0.0320 0.0024 0.1012 0.0255 0.0144 0.0034

2001 RET 0.3895 0.0347 0.0358 0.0023 0.1375 0.0266 0.0191 0.0034

2002 RET 0.3366 0.0346 0.0322 0.0025 0.1017 0.0276 0.0145 0.0037

2003 RET 0.2659 0.0345 0.0268 0.0028 0.1006 0.0290 0.0143 0.0039

2004 RET&FRA (2 mos) 0.2106 0.0334 0.0221 0.0030 0.1249 0.0290 0.0175 0.0038

2005 RET&FRA (4 mos) 0.1295 0.0321 0.0145 0.0033 0.0474 0.0275 0.0070 0.0039

2000 RET 0.4579 0.0315 0.0460 0.0022 0.1680 0.0253 0.0239 0.0032

2001 RET 0.4238 0.0316 0.0436 0.0023 0.1502 0.0259 0.0216 0.0034

2002 RET 0.3636 0.0312 0.0391 0.0025 0.1514 0.0259 0.0218 0.0034

2003 RET&FRA (2 mos) -0.0225 0.0277 -0.0032 0.0040 0.0290 0.0266 0.0045 0.0041

2004 RET&FRA (4 mos) -0.3416 0.0264 -0.0593 0.0055 -0.1653 0.0273 -0.0291 0.0053

2005 RET&FRA (6 mos) -0.6142 0.0253 -0.1251 0.0069 -0.2872 0.0268 -0.0544 0.0059

2000 None -0.0197 0.0212 -0.0039 0.0043 -0.0120 0.0221 -0.0023 0.0043

2001 None -0.0298 0.0222 -0.0060 0.0045 0.0003 0.0229 0.0001 0.0044

2002 FRA (2 mos) -0.0996 0.0220 -0.0207 0.0048 -0.0452 0.0228 -0.0089 0.0046

2003 FRA (4 mos) -0.1718 0.0221 -0.0372 0.0052 -0.1285 0.0229 -0.0265 0.0050

2004 FRA (6 mos) -0.2346 0.0222 -0.0524 0.0055 -0.1646 0.0235 -0.0346 0.0054

2005 FRA (8 mos) -0.2787 0.0222 -0.0636 0.0058 -0.2126 0.0240 -0.0458 0.0057

2000 None -0.0081 0.0208 -0.0017 0.0045 -0.0083 0.0216 -0.0017 0.0044

2001 FRA (2 mos) -0.0550 0.0217 -0.0120 0.0049 -0.0161 0.0224 -0.0033 0.0046

2002 FRA (4 mos) -0.1069 0.0217 -0.0239 0.0051 -0.1032 0.0225 -0.0222 0.0051

2003 FRA (6 mos) -0.1900 0.0217 -0.0443 0.0055 -0.1490 0.0224 -0.0328 0.0053

2004 FRA (8 mos) -0.2277 0.0217 -0.0540 0.0057 -0.1989 0.0223 -0.0449 0.0055

2005 FRA (10 mos) -0.3127 0.0213 -0.0771 0.0060 -0.2206 0.0225 -0.0503 0.0057

2000 FRA (2 mos) -0.0405 0.0205 -0.0098 0.0051 0.0071 0.0212 0.0016 0.0048

2001 FRA (4 mos) -0.0680 0.0216 -0.0168 0.0055 -0.0640 0.0224 -0.0149 0.0054

2002 FRA (6 mos) -0.1318 0.0215 -0.0334 0.0058 -0.0886 0.0222 -0.0209 0.0055

2003 FRA (8 mos) -0.1929 0.0216 -0.0502 0.0061 -0.1481 0.0221 -0.0360 0.0058

2004 FRA (10 mos) -0.2604 0.0212 -0.0697 0.0063 -0.1885 0.0217 -0.0466 0.0058

2005 FRA (12 mos) -0.3113 0.0211 -0.0850 0.0065 -0.2816 0.0217 -0.0726 0.0063

Men Women

Age 65

Age 66

Age 67

Ages 68-70

Age 64

Age 63

Age 62

SOURCE: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master Beneficiary 

Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based on Beneficiary Own Account Number 

for December 1999–2005 and June 2006. 

Notes: The dependent variable is binary: 1 if entitled by the end of each year; 0 if not entitled by the end of each year. The sample includes 

people who are fully insured at age 60. 

RET = retirement earnings test; FRA = full retirement age. 
33

Table 5. 

Marginal Effects on Benefit Entitlement Hazard, by Age and Sex

Year Policy Effects Estimate Std. E. Marg. Eff. Std. E. Estimate Std. E. Marg. Eff. Std. E.

2000 RET 0.8126 0.1316 0.1791 0.0393 0.5814 0.1353 0.0985 0.0301

2001 RET -0.2100 0.1358 -0.0262 0.0146 -0.0066 0.1369 -0.0008 0.0160

2002 RET -0.3638 0.1470 -0.0409 0.0126 0.0003 0.1445 0.0000 0.0171

2003 RET -0.6274 0.1457 -0.0592 0.0082 -0.2349 0.1439 -0.0235 0.0120

2004 RET -0.6911 0.1415 -0.0627 0.0072 -0.2687 0.1416 -0.0262 0.0112

2005 RET -0.6796 0.1434 -0.0622 0.0075 -0.1271 0.1431 -0.0137 0.0140

2000 RET 1.2326 0.1424 0.2987 0.0506 0.9865 0.1519 0.1893 0.0448

2001 RET -0.0710 0.1580 -0.0082 0.0173 -0.2544 0.1759 -0.0203 0.0113

2002 RET -0.4073 0.1796 -0.0366 0.0114 -0.0584 0.1794 -0.0055 0.0160

2003 RET -0.2214 0.1598 -0.0229 0.0138 -0.0218 0.1731 -0.0021 0.0163

2004 RET -0.2504 0.1548 -0.0253 0.0128 -0.3078 0.1808 -0.0235 0.0104

2005 RET&FRA (2 mos) -0.3630 0.1558 -0.0339 0.0108 -0.0585 0.1661 -0.0055 0.0148

2000 RET 1.1299 0.1358 0.3715 0.0524 0.7182 0.1428 0.1708 0.0446

2001 RET -0.1698 0.1469 -0.0357 0.0282 -0.3858 0.1612 -0.0486 0.0152

2002 RET -0.0717 0.1489 -0.0159 0.0318 -0.2343 0.1655 -0.0326 0.0195

2003 RET -0.2441 0.1441 -0.0494 0.0254 -0.2356 0.1578 -0.0328 0.0186

2004 RET&FRA (2 mos) 0.6452 0.1276 0.1897 0.0450 0.6273 0.1354 0.1428 0.0400

2005 RET&FRA (4 mos) 1.0344 0.1272 0.3254 0.0478 1.0070 0.1331 0.2605 0.0465

2000 RET 0.8605 0.1276 0.2871 0.0331 0.5750 0.1282 0.2248 0.0474

2001 RET 0.7082 0.1200 0.2455 0.0346 0.5385 0.1210 0.2112 0.0453

2002 RET 0.7508 0.1261 0.2577 0.0354 0.6111 0.1268 0.2381 0.0464

2003 RET&FRA (2 mos) 0.1458 0.1198 0.0560 0.0453 0.1157 0.1209 0.0460 0.0482

2004 RET&FRA (4 mos) -0.3575 0.1171 -0.1415 0.0464 -0.3054 0.1186 -0.1178 0.0441

2005 RET&FRA (6 mos) -0.6846 0.1200 -0.2676 0.0446 -0.5290 0.1207 -0.1981 0.0413

2000 None 0.1962 0.1248 0.0421 0.0292 0.1577 0.1269 0.0339 0.0293

2001 None 0.0431 0.1175 0.0086 0.0240 0.0699 0.1194 0.0144 0.0254

2002 FRA (2 mos) 0.0831 0.1233 0.0169 0.0260 0.0465 0.1251 0.0095 0.0260

2003 FRA (4 mos) -0.1315 0.1191 -0.0242 0.0205 -0.0879 0.1207 -0.0168 0.0221

2004 FRA (6 mos) -0.2348 0.1170 -0.0412 0.0183 -0.2264 0.1186 -0.0406 0.0190

2005 FRA (8 mos) -0.2009 0.1195 -0.0359 0.0194 -0.1753 0.1207 -0.0323 0.0205

2000 None 0.1523 0.1233 0.0431 0.0366 0.1906 0.1241 0.0559 0.0386

2001 FRA (2 mos) 0.0214 0.1156 0.0058 0.0315 0.0168 0.1166 0.0046 0.0325

2002 FRA (4 mos) 0.0764 0.1216 0.0211 0.0344 0.0643 0.1225 0.0181 0.0352

2003 FRA (6 mos) -0.1314 0.1173 -0.0337 0.0287 -0.1438 0.1182 -0.0377 0.0294

2004 FRA (8 mos) -0.2250 0.1154 -0.0558 0.0262 -0.2759 0.1162 -0.0690 0.0261

2005 FRA (10 mos) -0.2451 0.1177 -0.0607 0.0267 -0.2062 0.1183 -0.0531 0.0284

2000 FRA (2 mos) 0.1383 0.1220 0.0522 0.0468 0.1778 0.1223 0.0692 0.0481

2001 FRA (4 mos) 0.0053 0.1144 0.0020 0.0425 0.0024 0.1147 0.0009 0.0439

2002 FRA (6 mos) 0.0311 0.1206 0.0116 0.0451 0.0556 0.1208 0.0214 0.0468

2003 FRA (8 mos) -0.1507 0.1161 -0.0545 0.0409 -0.1224 0.1163 -0.0462 0.0431

2004 FRA (10 mos) -0.3091 0.1141 -0.1087 0.0377 -0.2669 0.1143 -0.0986 0.0405

2005 FRA (12 mos) -0.2925 0.1166 -0.1033 0.0389 -0.2893 0.1168 -0.1066 0.0411

Age 62

Men Women

Ages 68-70

Age 67

Age 66

Age 65

Age 64

Age 63

SOURCE: Authors' calculations using active and inactive files of the Continuous Work History Sample, 2004; and 1 percent Master Beneficiary 

Record extract for December 1999-2005 and June 2006. 

NOTES: The dependent variable is variable is binary: 1, if entitled during each year; 0, if not entitled but fully insured at age 60. Samples 

include those who have not become entitled by the beginning of the reference year. 

RET = retirement earnings test; FRA = full retirement age. 
34

Figure 1. 

Benefit Amount as a Percentage of the Primary Insurance Amount,

by Birth Year and Entitlement Age

(Percent)

Source: Social Security Administration (2007), Table 2.A17.1.

62 63 64 65 66 67

0

70

80

90

100

110

120

Entitlement Age

1937

1938

1939

1940

1941

1942

1943

Birth Year
35

Figure 2. 

Effect of Rule Changes on Treatment Groups, by Birth Year and

Calendar Year

Treatment

Birth Year (Month) 1997 1998 1999 2000 2001 2002 2003 2004 2005 Group

1923

1924

1925

1926

1927

1928

1929 NONE

1930

1931

1932

1933

1934 RET ONLY

1935 Treatment 1

1936 (Ages 68–70)

1937 NONE

1938 (1–10) Treatment 2

1938 (11–12) FRA & RET (Age 67)

1939 (1–8) FRA ONLY Treatment 3

1939 (9–12) (Age 66)

1940 (1–6) Treatment 4

1940 (7–12) (Age 65)

1941 (1–4) Treatment 5

1941 (5–12) (Age 64)

1942 (1–2) Treatment 6

1942 (3–12) (Age 63)

1943 Treatment 7 (Age 62)

Calendar Year

Source: Social Security Administration (2007), Tables 2.A17.1 and 2.A29.

Notes: Birth year is defined in years and months for cohorts born in 1938–1942. Persons born during this period are shown in two

separate groups, depending on the calendar year in which they reach the FRA. For example, those born in January–

October 1938 reach the FRA in 2003, but those born in November–December 1938 reach the FRA in 2004.

The first treatment group is affected only by the elimination of the earnings test in 2000.That group consists of those who

were born in 1930–1935, 1931–1936, 1932–1937, 1933–1937, 1934–1937, 1935–1937, respectively, for 2000, 2001,

2002, 2003, 2004, and 2005. The second treatment group is affected by both the increase in the FRA and the elimination

of the earnings test. It consists of those who were born in January 1938 through October 1938, January 1938 through

August 1939, and January 1938 through June 1940, respectively, for 2003, 2004, and 2005. The third treatment group,

which consists of those born in 1938 or later for years before attaining the FRA, is affected only by the increase in the

FRA. For example, for 2000, the 1938 cohort would not be directly affected by the change in the earnings test because

they were too young in that year.

RET = retirement earnings test; FRA = full retirement age.
36

Figure 3. 

Entitlement Probability: Percentage Entitled as Primary

Beneficiaries, Calendar Years 1997–2006, by Age and Sex

(Percent)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0

20

40

60

80

100

120

 70

69

 68

67

66

65

64

63

62

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0

20

40

60

80

100

120

Men

Women

Age

Source: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master

Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based

on Beneficiary Own Account Number for December 1999–2007.

Note: Data represent primary beneficiaries who were fully insured at age 60.
37

Figure 4. 

Entitlement Hazard: Percentage Newly Entitled, Calendar Years

1998–2006, by Age and Sex

(Percent)

1998 1999 2000 2001 2002 2003 2004 2005 2006

0

20

40

60

80

100

120

70

69

68

67

66

65

64

63

62

1998 1999 2000 2001 2002 2003 2004 2005 2006

0

20

40

60

80

100

120

Men

Women

Age

Source: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master

Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based

on Beneficiary Own Account Number for December 1999–2007.
38

Figure 5. 

Cumulative Percentage Distribution, by Entitlement Age and

Entitlement Year

(Percent)

62 62.5 63 63.5 64 64.5 65 65.5 66 66.5 67 67.5 68 68.5 69 69.5 70

0

20

40

60

80

100

Men

62 62.5 63 63.5 64 64.5 65 65.5 66 66.5 67 67.5 68 68.5 69 69.5 70

0

20

40

60

80

100

Entitlement Agea

1998 2000 2003 2006

Women

Entitlement Year

Source: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master

Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based

on Beneficiary Own Account Number for December 1999–2007.

Note: The cumulative percentages are measured among those who become entitled by age 70.

a. Entitlement age is measured in two-month increments; the notation “62.5” = 62 years and 6 months.
39

Figure 6. 

Cumulative Percentage Distribution, by Entitlement Age and

Birth Year

(Percent)

62 62.5 63 63.5 64 64.5 65 65.5

0

20

40

60

80

100

Men

62 62.5 63 63.5 64 64.5 65 65.5

0

20

40

60

80

100

Entitlement Agea

1930 1937 1939 1941

Women

Entitlement Year

Source: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master

Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based

on Beneficiary Own Account Number for December 1999–2007.

Note: The cumulative percentages are measured among those who become entitled by age 65 and 8 months.

a. Entitlement age is measured in two-month increments; the notation "62.5" = 62 years and 6 months.
40

Figure 7. 

Percentage Distribution, by Entitlement Age and Birth Year

(Percent)

62 62.5 63 63.5 64 64.5 65 65.5

0

20

40

60

80

100

Men

62 62.5 63 63.5 64 64.5 65 65.5

0

20

40

60

80

100

Entitlement Agea

1930

1937

1938

1939

1940 1941

Women

Birth Year

Source: Authors' tabulations using active and inactive files of the Continuous Work History Sample, 2004; 1 percent Master

Beneficiary Record extract based on Claim Account Number; and 1 percent Master Beneficiary Record extract based

on Beneficiary Own Account Number for December 1999–2007.

a. Entitlement age is measured in two-month increments; the notation "62.5" = 62 years and 6 months.