Claiming Social Security Benefits Early to Retire Later

Abstract

This paper examines Social Security benefit claiming behavior in the US using the Health and Retirement Study (HRS) to implement a duration model. It focuses essentially on the rushing/delaying behavior of the unemployed and investigates whether older unemployed individuals lacking liquidity use Social Security benefits as a safety net in order to finance consumption during an unemployment episode. In this way, Social Security might be thought as a form of unemployment insurance allowing people to maintain their standard of living during their job search. The purpose of this paper is hence to find empirical evidence about the potential insurance function of Social Security benefits, which would provide support for integrating Unemployment Insurance with Retirement Insurance even before eligibility for Social Security (SS) benefits. I find that being unemployed and in the left tail of the income distribution strongly predicts early claiming without retiring, meaning that although people claim their Social Security benefits, these unemployed individuals want to stay within the labor force, and could use these benefits in their costful job search process.