Social Security is an actuarially fair program, which means if you have an average life expectancy, it doesn’t matter when you start collecting benefits. You’re going to collect the same amount if you start at age 62, 65, or 70, and live an average lifespan. People collect more if they live longer or less if they die earlier.
Despite this fact, people can be influenced about when to start collecting benefits through particular messaging, according to three researchers. The trio tested a series of 10 frames using the behavioral economic concepts anchoring and framing. Interestingly, all of these various frames began with a short statement about the actuarially fair nature of Social Security, which appears to have been quickly overlooked.
The message that led to earliest start collection dates, a year earlier relative to the government’s current messaging, emphasized that early starters get less money, but that the “breakeven” age for people staring later was quite far down the line. For instance, the frame says that by delaying starting benefits from 62 to 63, you have to live “at least 15 more years in order to get back the $18,588.00 you forfeited by waiting one year.” In contrast, the latest benefit start dates came from messages emphasizing the gains that accompanied delaying collection and the consumption benefits of those extra dollars.
More on the experiment and findings is at the Rand Behavioral Finance Forum here.
Cass Sunstein is currently the Administrator of the White House Office of Information and Regulatory Affairs and has no affiliation with the Nudge blog.
The Nudge blog is edited by John Balz.
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