How do subjective mortality beliefs affect the value of social security and the optimal claiming ages?
Abstract Households that postpone claiming Social Security benefits are, in effect, making additional purchases of the Social Security annuity and acquiring valuable longevity insurance. This paper investigates the impact of plausible variations of subjective mortality beliefs on the value of delaye...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2024-03-01
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| Series: | International Studies of Economics |
| Subjects: | |
| Online Access: | https://doi.org/10.1002/ise3.69 |
| _version_ | 1797276871030734848 |
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| author | Tiantian Dai Wei Sun Anthony Webb |
| author_facet | Tiantian Dai Wei Sun Anthony Webb |
| author_sort | Tiantian Dai |
| collection | DOAJ |
| description | Abstract Households that postpone claiming Social Security benefits are, in effect, making additional purchases of the Social Security annuity and acquiring valuable longevity insurance. This paper investigates the impact of plausible variations of subjective mortality beliefs on the value of delayed claiming and the optimal claiming ages of retired workers. Using the Health and Retirement Study data, we show that older individuals could, on average, predict their life expectancy correctly; however, the average variance of age of death calculated from subjective mortality tables is 6.2%–14.4% lower than that from cohort life tables. Using numerical optimization techniques, we further show that, theoretically, older households place a lower value on delaying claiming when they have greater confidence in their ability to forecast their age of death. But the magnitude of this effect is not large enough to change their optimal claiming ages, unless they hold extreme subjective mortality beliefs. As a result, we conclude that subjective mortality beliefs alone cannot explain the prevalence of early claiming behaviors. |
| first_indexed | 2024-03-07T15:34:51Z |
| format | Article |
| id | doaj.art-42120bc0f77c47fba55feafb51688780 |
| institution | Directory Open Access Journal |
| issn | 2831-3224 |
| language | English |
| last_indexed | 2024-03-07T15:34:51Z |
| publishDate | 2024-03-01 |
| publisher | Wiley |
| record_format | Article |
| series | International Studies of Economics |
| spelling | doaj.art-42120bc0f77c47fba55feafb516887802024-03-05T11:42:14ZengWileyInternational Studies of Economics2831-32242024-03-011919211610.1002/ise3.69How do subjective mortality beliefs affect the value of social security and the optimal claiming ages?Tiantian Dai0Wei Sun1Anthony Webb2China Economics and Management Academy, School of Innovation and Development Central University of Finance and Economics Beijing ChinaSchool of Finance Renmin University of China Beijing ChinaRetirement Equity Lab The New School for Social Research New York New York USAAbstract Households that postpone claiming Social Security benefits are, in effect, making additional purchases of the Social Security annuity and acquiring valuable longevity insurance. This paper investigates the impact of plausible variations of subjective mortality beliefs on the value of delayed claiming and the optimal claiming ages of retired workers. Using the Health and Retirement Study data, we show that older individuals could, on average, predict their life expectancy correctly; however, the average variance of age of death calculated from subjective mortality tables is 6.2%–14.4% lower than that from cohort life tables. Using numerical optimization techniques, we further show that, theoretically, older households place a lower value on delaying claiming when they have greater confidence in their ability to forecast their age of death. But the magnitude of this effect is not large enough to change their optimal claiming ages, unless they hold extreme subjective mortality beliefs. As a result, we conclude that subjective mortality beliefs alone cannot explain the prevalence of early claiming behaviors.https://doi.org/10.1002/ise3.69annuitylife expectancySocial Securitysubjective mortality beliefsvariance of age of death |
| spellingShingle | Tiantian Dai Wei Sun Anthony Webb How do subjective mortality beliefs affect the value of social security and the optimal claiming ages? International Studies of Economics annuity life expectancy Social Security subjective mortality beliefs variance of age of death |
| title | How do subjective mortality beliefs affect the value of social security and the optimal claiming ages? |
| title_full | How do subjective mortality beliefs affect the value of social security and the optimal claiming ages? |
| title_fullStr | How do subjective mortality beliefs affect the value of social security and the optimal claiming ages? |
| title_full_unstemmed | How do subjective mortality beliefs affect the value of social security and the optimal claiming ages? |
| title_short | How do subjective mortality beliefs affect the value of social security and the optimal claiming ages? |
| title_sort | how do subjective mortality beliefs affect the value of social security and the optimal claiming ages |
| topic | annuity life expectancy Social Security subjective mortality beliefs variance of age of death |
| url | https://doi.org/10.1002/ise3.69 |
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