Framing Effects and Social Security Claiming Behavior

Eligible participants in the U.S. Social Security system have the ability to claim benefits anytime between ages 62 and 70, with the level of benefit being actuarially adjusted based on the date of claiming. Delaying claiming beyond the early entitlement age of 62 allows individuals an opportunity to increase expected lifetime utility by providing additional inflation-indexed annuity income at older ages, but the distribution of observed claiming ages is concentrated at the lower end of the relevant age distribution. This project shows that individual intentions with regard to Social Security claiming age are sensitive to the manner in which the early versus late claiming decision is framed. Using an experimental design that alters the manner in which the implications of Social Security benefits are framed, this paper shows that individuals are more likely to delay claiming (i) when later claiming is framed as a gain; (ii) when the value of delay is expressed in terms of consumption rather than in investment terms; and (iii) when the information provides an anchoring point at older, rather than younger, ages. It also finds evidence that the use of a "break-even analysis" has the very strong effect of encouraging individuals to claim early.