Have People Delayed Claiming Retirement Benefits? Responses to Changes in Social Security Rules

Summary

This article examines changes in the age at which people claim Social Security retirement benefits in response to two recent changes in the Social Security rules: the removal of the retirement earnings test at ages 65 to 69 in 2000 and the gradual increase in the full retirement age (FRA) for those born in 1938 or later. Data come from the 1 percent sample of Social Security administrative data for 1997–2005. Descriptive and regression analyses show that the largest effect of the change in the earnings test rule in 2000 occurs at age 65. At that age, the proportion of people who claim retirement benefits increases by about 4 percentage points among men and 2 percentage points among women. 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

Recently, two major changes in Social Security rules became effective: the removal of the retirement earnings test for persons who are at the full retirement age (FRA) through age 69 in 2000 or later and a gradual increase in the FRA for those who reach age 62 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 entitlement age at which people claim Social Security retirement benefits and the work behavior of older Americans.

The effectiveness of the 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 the change in the earnings test in 2000 is that claiming benefits at the FRA has become more attractive for those who previously claimed benefits later than the FRA. Accelerated benefit claims at the FRA with continued post-FRA employment reduce benefit amounts by forfeiting 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 affect the benefit claiming ages of those who are younger than the FRA as well.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.

Effects of raising the FRA would seem to be more straightforward at first glance. 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 Social Security administrative data, this article 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 claiming benefits close to the early retirement age. Results here will help shed light on responses by future workers as the FRA continues to rise to age 67 and, more generally, on responses to changes in retirement incentives.

Previous studies have examined effects of the earnings test removal in 2000, but none of them has investigated simultaneously the effects of the gradual increase in the FRA on earnings and old-age benefit entitlement.³ This study investigates effects of both program rule changes. We take advantage of the fact that while the change in the earnings test in 2000 affects those who are at 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 the calendar year and different birth years, we first identify three different 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.
• Those affected by both rule changes.

We then examine changes in the distribution of ages at which people claim benefits and benefit entitlement status across time and across birth cohorts. Also investigated are changes in the percentage of persons who are entitled to benefits among those who are fully insured both before and after 2000, by holding age constant. We define a person who is entitled to benefits as one who has filed a claim for a specific type of benefit and has received an award for that benefit. Once an award is made, the person usually receives an immediate payment.

The remainder of this article

• 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,
• presents regression results on the impact of the rule changes on the age at benefit entitlement, and
• concludes with the key findings.

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 to the earnings test occurred 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). Persons receiving old-age benefits who have not reached the FRA remain subject to the earnings test. Social Security benefits of those 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. Benefits are reduced $1 for every $3 earned beyond the modified threshold, which was $30,720 in 2003.⁴ Thus, the earnings test removal in 2000 not only eliminated the test for those who had attained ages 65–69 (more precisely, 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

In an effort to improve the solvency of the system, the 1983 Amendments to the Social Security Act gradually raised the full retirement age beginning with those 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 2-month intervals beginning with persons born in 1938 until it reaches age 67 for those born in 1960 or later.⁶ Persons born in 1938 have an FRA of 65 years and 2 months, those born in 1939 at 65 and 4 months, those born in 1940 at 65 and 6 months, and so forth (see Social Security Administration 2005, 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 age 62. For those who become entitled to benefits before the FRA, monthly benefits are reduced from the full benefit amount at the rate of 5/9 of 1 percent per month for the first 36 months before the FRA and 5/12 of 1 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 (Chart 1).⁷

Chart 1.
Benefit amounts as a percentage of the primary insurance amount, by birth year and entitlement age

Show as table

Table equivalent for Chart 1. Benefit amounts as a percentage of the primary insurance amount, by birth year and entitlement age

Entitlement age a	1937 or earlier	1938	1939	1940	1941	1942
62	80.0000	79.1667	78.3333	77.5000	76.6667	75.8333
62 & 2	81.1111	80.0000	79.1667	78.3333	77.5000	76.6667
62 & 4	82.2222	81.1111	80.0000	79.1667	78.3333	77.5000
62 & 6	83.3333	82.2222	81.1111	80.0000	79.1667	78.3333
62 & 8	84.4444	83.3333	82.2222	81.1111	80.0000	79.1667
62 & 10	85.5556	84.4444	83.3333	82.2222	81.1111	80.0000
63	86.6667	85.5556	84.4444	83.3333	82.2222	81.1111
63 & 2	87.7778	86.6667	85.5556	84.4444	83.3333	82.2222
63 & 4	88.8889	87.7778	86.6667	85.5556	84.4444	83.3333
63 & 6	90.0000	88.8889	87.7778	86.6667	85.5556	84.4444
63 & 8	91.1111	90.0000	88.8889	87.7778	86.6667	85.5556
63 & 10	92.2222	91.1111	90.0000	88.8889	87.7778	86.6667
64	93.3333	92.2222	91.1111	90.0000	88.8889	87.7778
64 & 2	94.4444	93.3333	92.2222	91.1111	90.0000	88.8889
64 & 4	95.5556	94.4444	93.3333	92.2222	91.1111	90.0000
64 & 6	96.6667	95.5556	94.4444	93.3333	92.2222	91.1111
64 & 8	97.7778	96.6667	95.5556	94.4444	93.3333	92.2222
64 & 10	98.8889	97.7778	96.6667	95.5556	94.4444	93.3333
65	100.0000	98.8889	97.7778	96.6667	95.5556	94.4444
65 & 2	101.0833	100.0000	98.8889	97.7778	96.6667	95.5556
65 & 4	102.1667	101.0833	100.0000	98.8889	97.7778	96.6667
65 & 6	103.2500	102.1667	101.1667	100.0000	98.8889	97.7778
65 & 8	104.3333	103.2500	102.3333	101.1667	100.0000	98.8889
65 & 10	105.4167	104.3333	103.5000	102.3333	101.2500	100.0000
66	106.5000	105.4167	104.6667	103.5000	102.5000	101.2500

SOURCE: Social Security Administration (2005), Table 2.A17.1.

a. Entitlement age is measured in 2-month increments; the notation "62.5" = 62 years and 6 months.

Both rule changes could affect Social Security finances as well as individuals' retirement wealth. Consider the responses of persons claiming benefits at ages below the FRA, at the FRA, and above the FRA. First, those who claim benefits at given ages earlier than the FRA would experience additional declines in benefits due to 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. To the extent that 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 Social Security trust fund finances. Finally, accelerated benefit claiming among 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' labor supply responses and benefit-claiming decisions. While 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.

An individual can earn a delayed retirement credit (DRC) 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 DRC is 1/2 of 1 percent for each incremental month, or 6 percent per year. The marginal (yearly) percentage increase in the DRC 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.⁸ The increase in DRC 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 FRA changes and the DRC changes could dilute the pure effect of raising the retirement age. Identifying the separate effects of these changes, however, is left for future research.

The focus of this article is on the effects of the Social Security rule changes, 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 2001–2002, with the unemployment rate reaching 6.0 percent in 2003. This recession may have resulted in older persons encountering difficulty holding on to existing jobs or finding new jobs. As a result, delays in claiming retirement benefits shown here may be understated to some degree.

Data and Analytical Strategy

The data used in this study come from a number of 1 percent extracts of Social Security Administration data, including the Continuous Work History Sample (CWHS) 2004, Master Beneficiary Record (MBR), and 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. Further, 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 is an analytical master file for the 1 percent sample of Social Security numbers ever issued and is the base data set used for this article. The file is derived from several administrative master files, including the MBR 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 (Social Security-covered annual earnings from 1951 to the present and total annual wages from 1978 to the present), OASDI benefit entitlement status, and death information (if any). The CWHS has both an active and an inactive file. The active file includes workers who ever reported earnings from any employment. Before 1978, the CWHS tracked only earnings covered by Social Security. However, starting in 1978, the CWHS was extended to include uncovered earnings. The inactive sample includes those who never worked in covered or uncovered employment. By combining both the active and inactive files, we can analyze the earnings and OASDI program participation of our 1 percent sample of the U.S. population with valid Social Security numbers.

The semiannual Master Beneficiary Record 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.⁹ Information on date of death permits us to eliminate those in the sample who died. Thus, our sample includes only those who are alive at the end of each reference year.

Investigating how changes in the rules affect age at entitlement requires a data source with precise information on age, birth month and year, and month and year of entitlement. The elimination of the retirement earnings test affects those from age 65 (or 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 2-month intervals, the year in which a person becomes affected by the elimination of the retirement earnings test not only depends on the year in which they were born but also on the month in which they were born. For example, someone born in November through 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 FRA increase.

Whereas the earnings test removal in 2000 was a relatively abrupt change in a Social Security program parameter, the gradual increase in the FRA was anticipated for many years following the enactment of the 1983 amendments. The earliest birth cohort affected by the 1983 amendments reached their FRA in 2003–2004. Thus, a forward-looking individual would have adjusted his or her labor supply over the last 20 years in order to compensate for the expected benefit reduction due to the increase in the FRA. Unlike ongoing labor supply decisions, benefit claiming can occur only after reaching the early retirement age. Thus, the standard before-and-after or difference-in-difference approach is valid in evaluating the effect of the 1983 amendment on the age at which benefits are claimed. It is worth noting, however, that larger compensating adjustments in labor supply result in smaller estimated effects on the age at benefit entitlement.

The fact that the "treatment" in this study depends on both time and age suggests a quasi-experimental study using a standard design. Thus, our analysis relies primarily on comparing benefit entitlement probabilities and entitlement hazards over the period before and after the rule changes became effective, holding age constant. Entitlement hazard refers to the probability that those who have not yet claimed benefits will do so during the specified period.

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

• The first treatment group is affected only by the 2000 earnings test rule change. 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 change in the earnings test in 2000. 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 prior to attainment of the FRA, is affected only by the increase in the FRA. For example, for the year 2000, the 1938 cohort would not be directly affected by the earnings test change because they were too young in that year.¹⁰

Chart 2.
Effect of rule changes on treatment groups, by birth year and calendar year

SOURCE: Social Security Administration (2005, 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 2000 earnings test rule change. 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 change in the earnings test in 2000. 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 prior to attainment of the FRA, is affected only by the increase in the FRA. For example, for the year 2000, the 1938 cohort would not be directly affected by the earnings test change because they were too young in that year.

RET = retirement earnings; FRA = full retirement age.

Descriptive Analysis

An Overview of the 1 Percent Sample

For 1997–2005, year-end counts of OASI beneficiaries and persons who are fully insured (as of age 60) give us 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.¹¹ Only 292 of the 10,374 auxiliary beneficiaries in that age group in 2000 are male. While the number of women auxiliary beneficiaries tends to drop significantly over the study period, the number of men auxiliary beneficiaries 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, we note that the reduction factors for the spouse and survivor portion of benefits are different than for primary benefits and that the FRA increase for survivor benefits has a different schedule than that for primary or spouse benefits (Social Security Administration 2005, Tables 2.A21–2.A22).

Interestingly, the percentage of persons 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 arises in large part from delayed 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 which those aged 65 face the higher FRA. A part of the gradual decline, known as the spillover effect associated with the earnings test removal, may be attributed to individuals aged 62–64 who continue to work and delay claiming benefits until they reach age 65 following the removal of the earnings test. Of course, that effect is unlikely to be as large as the direct effect of the rising FRA.

Among those 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 removal of 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). It is notable 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 removal, the percentage of primary men beneficiaries rises nearly 3 percentage points to 97 percent. Female primary beneficiaries also increase more than 1 percentage point to 86 percent.

The rest of our analysis focuses exclusively on primary beneficiaries because their benefit claiming behavior has the biggest effect on household Social Security benefits. Primary-worker beneficiaries are the largest group among Old-Age and Survivors Insurance (OASI) beneficiaries; they constituted approximately 75 percent of total OASI beneficiaries in 2002 (Social Security Administration 2004). Only persons aged 62 or older can claim benefits as primary beneficiaries, so we do not include persons 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 persons who were ever beneficiaries under the Social Security Disability Insurance program and Old-Age beneficiaries who converted from the Disability Insurance program.

Percentage of Primary Beneficiaries in Each Treatment Group

Our empirical strategy is to trace both the number and the percentage of primary beneficiaries among the fully insured population from 1997–2005, by holding age constant. Data on the population that is fully insured as of age 60 can be found in Table 2 and Chart 3.

Chart 3.
Entitlement probability: Percentage entitled as primary beneficiaries, 1997–2005, by sex and age

Men

Women

Show as table

Table equivalent for Chart 3. Entitlement probability: Percentage entitled as primary beneficiaries, 1997–2005, by sex and age

Age	1997	1998	1999	2000	2001	2002	2003	2004	2005
	Men
70	0.9778	0.9740	0.9758	0.9756	0.9746	0.9777	0.9794	0.9777	0.9778
69	0.9636	0.9637	0.9613	0.9712	0.9762	0.9777	0.9752	0.9753	0.9761
68	0.9574	0.9520	0.9526	0.9727	0.9745	0.9734	0.9738	0.9741	0.9721
67	0.9446	0.9417	0.9493	0.9702	0.9714	0.9721	0.9718	0.9698	0.9669
66	0.9301	0.9354	0.9313	0.9659	0.9698	0.9674	0.9648	0.9624	0.9575
65	0.9138	0.8999	0.9032	0.9616	0.9583	0.9553	0.9114	0.8539	0.7899
64	0.6503	0.6464	0.6377	0.6381	0.6347	0.6178	0.6017	0.5851	0.5770
63	0.5805	0.5727	0.5697	0.5724	0.5546	0.5433	0.5222	0.5148	0.4910
62	0.4346	0.4284	0.4392	0.4202	0.4094	0.3938	0.3816	0.3640	0.3542
	Women
70	0.8680	0.8628	0.8715	0.8652	0.8891	0.8774	0.8909	0.8883	0.9050
69	0.8405	0.8514	0.8427	0.8679	0.8592	0.8670	0.8724	0.8822	0.8829
68	0.8444	0.8360	0.8545	0.8527	0.8606	0.8644	0.8742	0.8757	0.8825
67	0.8297	0.8438	0.8355	0.8550	0.8615	0.8689	0.8684	0.8754	0.8853
66	0.8334	0.8244	0.8336	0.8556	0.8635	0.8614	0.8678	0.8771	0.8657
65	0.8071	0.8128	0.8246	0.8570	0.8536	0.8592	0.8376	0.7909	0.7620
64	0.6181	0.6326	0.6317	0.6248	0.6297	0.6214	0.6005	0.5944	0.5861
63	0.5775	0.5728	0.5690	0.5716	0.5686	0.5429	0.5368	0.5258	0.5272
62	0.4490	0.4406	0.4429	0.4484	0.4199	0.4195	0.4089	0.4013	0.3749

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.

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

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 earnings test change in 2000, benefit claiming among those who had already attained the FRA accelerated at the same time that it slowed down a bit among those younger than the 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 2004 and 2005. For those who are younger than age 65, the percentage entitled decreases slightly over the period 2003–2005, 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 more than likely understate the effect on persons 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 those who are "newly" entitled in a given year, among those who are fully insured but not previously entitled (Table 3 and Chart 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, whereas 41.8 percent of men aged 69 became entitled in 2000. Further, 32.3 percent of men aged 66 who were not yet entitled became entitled in 1999, whereas 65.9 percent of men aged 66 became entitled in 2000. For men and women aged 65, the entitlement hazards decline noticeably starting from 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 those born in November or December 1938 reach their FRA. Results here also show that men are more responsive to the rule changes than women.

Chart 4.
Entitlement hazard: Percentage newly entitled, 1998–2005, by sex and age

Men

Women

Show as table

Table equivalent for Chart 4. Entitlement hazard: Percentage newly entitled, 1998–2005, by sex and age

Age	1998	1999	2000	2001	2002	2003	2004	2005
	Men
70	0.3012	0.3361	0.3829	0.1278	0.0596	0.0909	0.0932	0.0723
69	0.1604	0.1971	0.4177	0.1348	0.1273	0.0791	0.0608	0.0820
68	0.1393	0.1990	0.4783	0.1472	0.0821	0.0564	0.0891	0.0806
67	0.1711	0.2217	0.5823	0.1581	0.0787	0.1429	0.1621	0.1297
66	0.2577	0.3226	0.6585	0.2094	0.2194	0.2136	0.5877	0.7174
65	0.7152	0.7273	0.8976	0.8874	0.8825	0.7712	0.6378	0.4963
64	0.1591	0.1561	0.1623	0.1513	0.1457	0.1318	0.1332	0.1311
63	0.2450	0.2491	0.2395	0.2326	0.2298	0.2133	0.2180	0.1996
62	0.4277	0.4389	0.4196	0.4086	0.3932	0.3813	0.3631	0.3536
	Women
70	0.1492	0.2022	0.1688	0.1696	0.1532	0.1570	0.1176	0.1850
69	0.0683	0.0702	0.1783	0.0664	0.0595	0.0639	0.0785	0.0750
68	0.0599	0.1280	0.2477	0.0594	0.0388	0.0103	0.0585	0.0523
67	0.1199	0.1217	0.3580	0.0680	0.0880	0.1212	0.0890	0.1266
66	0.2041	0.2432	0.4151	0.1134	0.1310	0.1660	0.5000	0.6311
65	0.6760	0.6798	0.8059	0.8237	0.8257	0.7243	0.6114	0.5080
64	0.1747	0.1807	0.1732	0.1782	0.1563	0.1603	0.1535	0.1554
63	0.2705	0.2808	0.2807	0.2589	0.2536	0.2359	0.2290	0.2370
62	0.4794	0.4775	0.4795	0.4509	0.4462	0.4358	0.4224	0.3976

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.

Entitlement Age Distribution by Entitlement Year and Birth Year

We next present the distribution of benefit entitlement ages by entitlement year and birth cohort. 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 Chart 5 show the percentage of fully insured people who have claimed benefits as of a specific age in each year 1997–2005. Here we choose the age range from 62 to 70 because the percentage of those who become entitled by age 70 tends to be stable before and after the rule changes (Table 2). Several interesting aspects are evident. First, the distribution of males shifts more than that of females, suggesting again that males are more responsive to the rule changes than females. Second, in the years following the earnings test removal, 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 somewhat affects the benefit entitlement age for those who are younger than the FRA. Third, gradual downward shifts in the curves in the segment for those at entitlement age 65 or older appear to be a result of the gradual increase in the FRA for those who are born in 1938 or later. Fourth, the curves of 2000 through 2005, particularly for those at the segment younger than the entitlement age 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.

Chart 5.
Cumulative percentage distribution of entitlement age, by sex and entitlement year

Men

Women

Show as table

Table equivalent for Chart 5. Cumulative percentage distribution of entitlement age, by sex and entitlement year

Entitlement age a	1998	2000	2003	2005
	Men
62	3.6083	3.5533	3.4188	3.4032
62.083	52.3853	51.8633	51.2403	51.0947
62.167	54.9316	54.2734	53.6001	53.5135
62.25	56.944	56.2354	55.5052	55.3254
62.333	58.5702	57.7788	57.0549	56.846
62.417	60.0885	59.2355	58.3737	58.1718
62.5	61.2963	60.3714	59.5626	59.3562
62.583	62.3129	61.3505	60.5025	60.3889
62.667	63.3144	62.3094	61.4352	61.3216
62.75	64.278	63.2056	62.3228	62.2284
62.833	65.2321	64.1018	63.2014	63.1559
62.917	66.067	64.8947	63.9591	63.9662
63	67.112	65.8683	64.9117	64.9661
63.083	68.1835	66.8327	65.8859	65.9695
63.167	68.9086	67.5334	66.5228	66.6091
63.25	69.6488	68.2433	67.2517	67.3401
63.333	70.2432	68.8149	67.8182	67.8987
63.417	70.8944	69.4031	68.3901	68.4694
63.5	71.4207	69.901	68.9133	68.9883
63.583	71.9224	70.4099	69.4148	69.5141
63.667	72.4638	70.9299	69.8947	69.9813
63.75	72.9466	71.389	70.362	70.4537
63.833	73.4729	71.8721	70.8329	70.9347
63.917	73.9575	72.3478	71.3272	71.4174
64	74.6864	72.9932	71.937	72.0363
64.083	75.3452	73.587	72.5143	72.6328
64.167	75.845	74.0498	72.9888	73.1121
64.25	76.3088	74.4868	73.42	73.5414
64.333	76.7385	74.9349	73.9594	74.0379
64.417	77.1929	75.3775	74.4447	74.5568
64.5	77.7116	75.9344	75.031	75.105
64.583	78.3098	76.4821	75.5686	75.5998
64.667	79.3719	77.4317	76.5825	76.5187
64.75	81.5869	79.473	78.9621	78.7582
64.833	83.8681	81.5677	81.2768	81.0253
64.917	86.1607	83.6071	83.3479	83.0062
65	96.5806	95.0194	95.0151	91.6884
65.083	96.8835	95.3882	95.4445	92.497
65.167	97.1183	95.6242	97.4507	95.0261
65.25	97.3417	95.9008	97.6419	95.4709
65.333	97.5178	96.1516	97.8367	97.7466
65.417	97.6882	96.371	97.9937	97.8966
65.5	97.8359	96.5757	98.1579	99.1034
65.583	97.9855	96.7748	98.3022	99.1844
65.667	98.0877	96.9555	98.4664	99.2534
65.75	98.188	97.1141	98.5999	99.3137
65.833	98.3054	97.2764	98.7172	99.3671
65.917	98.4114	97.4294	98.8254	99.4154
66	98.5117	97.5566	98.9192	99.4602
66.083	98.595	97.6672	98.9968	99.4895
66.167	98.6707	97.776	99.069	99.5274
66.25	98.718	97.9051	99.1827	99.555
66.333	98.7937	98.0305	99.2621	99.5981
66.417	98.8694	98.1448	99.3415	99.6395
66.5	98.9489	98.2186	99.4046	99.674
66.583	99.0208	98.3182	99.4677	99.6964
66.667	99.0738	98.3864	99.5092	99.7102
66.75	99.123	98.4657	99.576	99.7378
66.833	99.1874	98.5487	99.6337	99.7568
66.917	99.2366	98.6261	99.6698	99.774
67	99.2858	98.7146	99.7257	99.793
67.083	99.3161	98.7755	99.7473	99.8051
67.167	99.354	98.8456	99.7635	99.8223
67.25	99.3843	98.9101	99.7761	99.8344
67.333	99.4108	98.9691	99.7851	99.8482
67.417	99.4354	99.006	99.814	99.8551
67.5	99.4581	99.0687	99.8356	99.8672
67.583	99.4827	99.1148	99.8518	99.8793
67.667	99.5111	99.1664	99.8608	99.8845
67.75	99.53	99.2088	99.8716	99.8897
67.833	99.5546	99.2586	99.877	99.8914
67.917	99.5811	99.3121	99.8824	99.8914
68	99.6114	99.36	99.8914	99.8948
68.083	99.6436	99.4079	99.895	99.9034
68.167	99.6512	99.4669	99.8986	99.912
68.25	99.6834	99.513	99.9076	99.9189
68.333	99.6891	99.5499	99.9148	99.9223
68.417	99.7061	99.5794	99.9166	99.9292
68.5	99.725	99.6015	99.931	99.9378
68.583	99.7401	99.6236	99.9418	99.9464
68.667	99.7496	99.6531	99.9436	99.9481
68.75	99.7553	99.6808	99.9454	99.9533
68.833	99.7667	99.6919	99.9526	99.9567
68.917	99.7762	99.7085	99.9562	99.9567
69	99.8046	99.7417	99.958	99.9636
69.083	99.816	99.773	99.9616	99.967
69.167	99.8293	99.8043	99.967	99.9687
69.25	99.8501	99.8301	99.9688	99.9721
69.333	99.8709	99.8578	99.9706	99.9755
69.417	99.8823	99.8891	99.9706	99.9841
69.5	99.8956	99.9131	99.976	99.9875
69.583	99.9051	99.9279	99.9778	99.9892
69.667	99.9108	99.9427	99.9814	99.9892
69.75	99.9127	99.9556	99.9832	99.9909
69.833	99.9203	99.9648	99.9868	99.9909
69.917	99.926	99.9703	99.9868	99.9926
70	99.9998	99.9998	99.9994	99.9995
	Women
62	3.6561	3.7071	3.6268	3.5341
62.083	56.1375	56.0614	55.1698	54.8216
62.167	58.5432	58.4344	57.5002	57.1225
62.25	60.3889	60.2268	59.2456	58.8039
62.333	61.8999	61.8257	60.7855	60.3169
62.417	63.2137	63.075	62.0471	61.6301
62.5	64.3126	64.1104	63.0747	62.7577
62.583	65.2671	65.0134	64.0676	63.7654
62.667	66.1617	65.9504	64.9877	64.7132
62.75	67.0352	66.8127	65.7782	65.5782
62.833	67.9334	67.6512	66.6794	66.5317
62.917	68.7787	68.4659	67.4857	67.3738
63	69.7297	69.4063	68.4501	68.4072
63.083	70.6525	70.3297	69.5347	69.4891
63.167	71.3499	71.0392	70.2461	70.217
63.25	72.0156	71.7046	70.8817	70.8393
63.333	72.558	72.2512	71.4635	71.4873
63.417	73.1638	72.8012	72.0896	72.0697
63.5	73.6921	73.2968	72.6271	72.6264
63.583	74.2099	73.8332	73.1836	73.1774
63.667	74.6819	74.2881	73.6389	73.6056
63.75	75.2525	74.8109	74.1227	74.0709
63.833	75.7914	75.2997	74.6571	74.6361
63.917	76.2141	75.7207	75.0808	75.0843
64	76.834	76.2435	75.6057	75.6552
64.083	77.3236	76.7867	76.2191	76.2747
64.167	77.8484	77.2722	76.6871	76.7943
64.25	78.2887	77.7339	77.1962	77.2653
64.333	78.7219	78.1243	77.6673	77.7192
64.417	79.1939	78.5894	78.1542	78.2216
64.5	79.7117	79.0681	78.6791	78.6955
64.583	80.2999	79.6384	79.2672	79.2436
64.667	81.4376	80.572	80.2601	80.2028
64.75	83.8926	82.8906	82.992	82.7834
64.833	86.2102	85.0361	85.4109	85.2242
64.917	88.3482	86.9066	87.4187	87.1368
65	96.8333	95.9129	96.1109	93.3343
65.083	97.1186	96.2422	96.4492	94.0308
65.167	97.3088	96.4459	98.027	96.012
65.25	97.499	96.6869	98.1756	96.3974
65.333	97.6822	96.9008	98.3179	98.0474
65.417	97.9041	97.0909	98.4191	98.1816
65.5	98.0485	97.2912	98.5424	99.0666
65.583	98.1894	97.4609	98.6531	99.1437
65.667	98.3268	97.6035	98.7574	99.2036
65.75	98.4219	97.7053	98.827	99.2521
65.833	98.5205	97.8513	98.9219	99.2892
65.917	98.5804	97.9531	99.0104	99.332
66	98.679	98.0957	99.1084	99.3663
66.083	98.7459	98.2111	99.1811	99.4034
66.167	98.8093	98.2858	99.2285	99.4234
66.25	98.8762	98.3809	99.2854	99.4491
66.333	98.9502	98.4827	99.3581	99.4948
66.417	99.003	98.5574	99.415	99.5205
66.5	99.0734	98.6423	99.4782	99.5519
66.583	99.1333	98.7136	99.5351	99.6033
66.667	99.1615	98.7577	99.573	99.6347
66.75	99.2038	98.812	99.6078	99.6518
66.833	99.2496	98.8595	99.6489	99.6775
66.917	99.2778	98.8968	99.6647	99.6946
67	99.3271	98.9579	99.69	99.7146
67.083	99.3835	99.036	99.7058	99.7203
67.167	99.4152	99.0767	99.7279	99.7431
67.25	99.4434	99.1276	99.7342	99.7517
67.333	99.461	99.1785	99.75	99.7717
67.417	99.4892	99.2158	99.769	99.786
67.5	99.5315	99.2633	99.7943	99.7917
67.583	99.5562	99.3074	99.8006	99.7974
67.667	99.5809	99.3583	99.8101	99.8003
67.75	99.6126	99.3956	99.8164	99.8089
67.833	99.6302	99.4431	99.8227	99.8118
67.917	99.6513	99.4872	99.8259	99.8175
68	99.6689	99.5211	99.8322	99.8204
68.083	99.6936	99.5449	99.8385	99.8347
68.167	99.7006	99.5687	99.8385	99.8433
68.25	99.7147	99.5959	99.8448	99.8462
68.333	99.7323	99.6265	99.8638	99.8491
68.417	99.7429	99.6503	99.8701	99.8548
68.5	99.7605	99.6639	99.8827	99.8691
68.583	99.7711	99.6945	99.8827	99.872
68.667	99.7852	99.7149	99.889	99.8749
68.75	99.7958	99.7285	99.8985	99.8835
68.833	99.8169	99.7591	99.9017	99.8864
68.917	99.831	99.7693	99.9049	99.8864
69	99.838	99.7863	99.9081	99.8864
69.083	99.845	99.8067	99.9113	99.895
69.167	99.845	99.8237	99.9113	99.8979
69.25	99.8626	99.8305	99.9208	99.9065
69.333	99.8661	99.8441	99.9271	99.9151
69.417	99.8802	99.8611	99.9271	99.918
69.5	99.8837	99.8883	99.9303	99.9209
69.583	99.8872	99.8985	99.9303	99.9295
69.667	99.8907	99.9223	99.9303	99.9324
69.75	99.8942	99.9257	99.9335	99.9353
69.833	99.8942	99.9291	99.943	99.9353
69.917	99.9048	99.9427	99.9462	99.9382
70	99.9999	100.0004	100	100.001

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.

a. Entitlement age is measured in 2-month increments; the notation "62.5" = 62 years and 6 months.

Sorting out the economic effects of the benefit reductions from the signaling or institutional role of the FRA is a difficult task, but Chart 6 may offer some clues. The chart shows the proportion of men and women among the cohorts born in 1930, 1937, and 1940 who become entitled to retirement benefits at 2-month intervals between ages 62 and 65 and 6 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 59 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 1940 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. Benefit reductions alone affect people who retire before age 65, so the drop in the percentage who claim before age 65 largely reflects that benefit reduction.

Chart 6.
Percentage distribution of fully insured men and women, by entitlement age, sex, and birth year

Men

Women

Show as table

Table equivalent for Chart 6. Percentage distribution of fully insured men and women, by entitlement age, sex, and birth year

Entitlement age a	1930	1937	1940
	Men
62	3.3508	2.9412	2.5749
62.083	46.925	45.2271	42.3054
62.167	49.3338	47.4717	44.1704
62.25	51.1909	49.0971	45.5902
62.333	52.7385	50.3355	46.8897
62.417	54.5418	51.5481	48.0809
62.5	55.7529	52.593	49.2962
62.583	56.8026	53.5089	50.1986
62.667	57.8253	54.3474	51.0168
62.75	58.7942	55.2246	51.8952
62.833	59.7362	56.2566	52.8337
62.917	60.7051	57.0048	53.6399
63	61.849	57.9852	54.6025
63.083	62.9929	58.9914	55.529
63.167	63.733	59.5332	56.0584
63.25	64.5135	60.1137	56.8405
63.333	65.1325	60.6168	57.394
63.417	65.8726	61.0683	57.9956
63.5	66.4513	61.6359	58.6574
63.583	66.9492	62.1261	59.2229
63.667	67.5144	62.6163	59.7162
63.75	68.12	63.2226	60.1855
63.833	68.6987	63.7902	60.6427
63.917	69.3312	64.2675	61.112
64	70.0444	64.9641	61.8339
64.083	70.7845	65.5446	62.6521
64.167	71.3362	66.2154	63.0371
64.25	71.9283	66.783	63.5665
64.333	72.3858	67.5312	64.0478
64.417	73.0721	68.1633	64.505
64.5	73.8122	68.8728	65.0104
64.583	74.5658	69.5694	65.3954
64.667	76.0192	71.0142	66.1534
64.75	78.7241	75.039	68.1628
64.833	81.8058	78.522	70.3888
64.917	84.6991	81.0762	72.326
65	98.4388	99.3812	74.9972
65.083	98.8156	99.536	77.151
65.167	99.0444	99.6134	78.7633
65.25	99.327	99.6779	80.7486
65.333	99.5692	99.7682	82.4692
65.417	99.7441	99.8585	84.4184
65.5	99.9998	100.0004	100.0002
	Women
62	3.936	3.6617	3.1868
62.083	56.2724	52.5904	48.3993
62.167	58.2674	54.4292	50.4366
62.25	59.8131	55.7564	51.9791
62.333	61.1071	57.2754	53.3324
62.417	62.3113	58.2828	54.4674
62.5	63.156	59.3861	55.4424
62.583	64.0726	60.0737	56.5774
62.667	65.0072	61.0331	57.4942
62.75	65.798	61.9125	58.1781
62.833	66.6787	62.8879	59.1676
62.917	67.3796	63.6554	59.9388
63	68.2962	64.343	60.8556
63.083	69.1229	65.1585	61.8742
63.167	69.7879	65.7022	62.529
63.25	70.5607	66.3898	63.1402
63.333	70.992	66.9654	63.8096
63.417	71.3694	67.3651	64.3335
63.5	71.7648	67.9407	64.7992
63.583	72.2141	68.4844	65.3376
63.667	72.5915	69.0121	65.7014
63.75	73.1846	69.6517	66.1525
63.833	73.6339	70.3233	66.7346
63.917	74.1551	70.755	67.1712
64	74.6583	71.3626	67.8697
64.083	75.2334	72.0182	68.5391
64.167	75.7546	72.6098	69.1648
64.25	76.3657	73.1535	69.5286
64.333	77.0307	73.7771	69.9361
64.417	77.5339	74.4647	70.3872
64.5	78.1809	75.1363	70.6637
64.583	78.8459	75.8398	71.2167
64.667	80.1759	77.4867	71.9588
64.75	82.9617	81.724	74.4617
64.833	85.6756	84.6181	76.9355
64.917	87.8862	86.7607	78.9728
65	98.6878	99.2327	81.3884
65.083	98.9933	99.3606	83.091
65.167	99.0832	99.5365	84.5025
65.25	99.4427	99.6324	86.467
65.333	99.6943	99.7283	87.8349
65.417	99.892	99.8882	89.5666
65.5	99.9998	100.0001	100.0002

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.

a. Entitlement age is measured in 2-month increments; the notation "62.5" = 62 years and 6 months.

As shown in Chart 7, more dramatic changes are evident in the entitlement age 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 2 months per year for the 1938, 1939, and 1940 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 6 months, the relevant FRA for the 1940 cohort. People who previously would have claimed benefits at age 65 but waited until their new, higher FRA were probably responding to a combination of the benefit reduction and the signaling aspect of the Social Security retirement age. It is also possible that the "full" retirement age in integrated private pension plans influenced the age at claiming Social Security benefits. Further investigation will help identify those two effects more clearly.

Chart 7.
Entitlement age distribution, by sex and birth year

Men

Women

Show as table

Table equivalent for Chart 7. Entitlement age distribution, by sex and birth year

Entitlement age a	1937	1938	1939	1940
	Men
62	2.9412	2.909	2.7401	2.5749
62.083	42.2859	40.9108	39.156	39.7305
62.167	2.2446	2.1849	2.2752	1.865
62.25	1.6254	1.8043	1.8226	1.4198
62.333	1.2384	1.2152	1.5535	1.2995
62.417	1.2126	1.1538	1.1254	1.1912
62.5	1.0449	1.0311	1.0642	1.2153
62.583	0.9159	0.6628	1.0398	0.9024
62.667	0.8385	0.8592	0.893	0.8182
62.75	0.8772	0.6874	0.893	0.8784
62.833	1.032	0.8592	0.9297	0.9385
62.917	0.7482	0.7733	0.7706	0.8062
63	0.9804	0.7856	1.0153	0.9626
63.083	1.0062	1.0433	0.844	0.9265
63.167	0.5418	0.5524	0.6116	0.5294
63.25	0.5805	0.8224	0.6728	0.7821
63.333	0.5031	0.5401	0.6606	0.5535
63.417	0.4515	0.5892	0.6116	0.6016
63.5	0.5676	0.491	0.526	0.6618
63.583	0.4902	0.5033	0.5749	0.5655
63.667	0.4902	0.5155	0.3547	0.4933
63.75	0.6063	0.5033	0.5382	0.4693
63.833	0.5676	0.4787	0.4893	0.4572
63.917	0.4773	0.7487	0.4281	0.4693
64	0.6966	0.6628	0.685	0.7219
64.083	0.5805	0.6383	0.5994	0.8182
64.167	0.6708	0.4787	0.5749	0.385
64.25	0.5676	0.491	0.4526	0.5294
64.333	0.7482	0.7119	0.4404	0.4813
64.417	0.6321	0.6874	0.6728	0.4572
64.5	0.7095	0.6874	0.5015	0.5054
64.583	0.6966	0.6383	0.6728	0.385
64.667	1.4448	1.0433	0.9419	0.758
64.75	4.0248	2.8231	2.1407	2.0094
64.833	3.483	3.0563	2.8502	2.226
64.917	2.5542	3.1668	2.5199	1.9372
65	18.305	3.5473	3.156	2.6712
65.083	0.1548	2.1971	2.1407	2.1538
65.167	0.0774	15.834	1.8593	1.6123
65.25	0.0645	0.356	2.0917	1.9853
65.333	0.0903	0.1964	15.5719	1.7206
65.417	0.0903	0.0859	0.2936	1.9492
65.5	0.1419	0.0736	0.2446	15.5818
	Women
62	3.6617	3.4933	2.9975	3.1868
62.083	48.9287	48.5607	46.2608	45.2125
62.167	1.8388	2.2939	1.8387	2.0373
62.25	1.3272	1.5292	1.3752	1.5425
62.333	1.519	0.9895	1.2515	1.3533
62.417	1.0074	0.8696	1.2052	1.135
62.5	1.1033	0.6897	0.9734	0.975
62.583	0.6876	0.8846	1.097	1.135
62.667	0.9594	0.5997	0.8344	0.9168
62.75	0.8794	0.7496	0.788	0.6839
62.833	0.9754	0.9295	0.7726	0.9895
62.917	0.7675	0.7346	0.6644	0.7712
63	0.6876	0.9595	0.8653	0.9168
63.083	0.8155	0.9445	1.0816	1.0186
63.167	0.5437	0.7196	0.6799	0.6548
63.25	0.6876	0.4648	0.6953	0.6112
63.333	0.5756	0.6447	0.5871	0.6694
63.417	0.3997	0.5847	0.6799	0.5239
63.5	0.5756	0.5097	0.7726	0.4657
63.583	0.5437	0.5397	0.5408	0.5384
63.667	0.5277	0.3898	0.3245	0.3638
63.75	0.6396	0.5697	0.4944	0.4511
63.833	0.6716	0.5097	0.6026	0.5821
63.917	0.4317	0.3598	0.4635	0.4366
64	0.6076	0.5397	0.618	0.6985
64.083	0.6556	0.6147	0.5717	0.6694
64.167	0.5916	0.2999	0.4172	0.6257
64.25	0.5437	0.5697	0.3554	0.3638
64.333	0.6236	0.5247	0.3708	0.4075
64.417	0.6876	0.4348	0.7417	0.4511
64.5	0.6716	0.6747	0.4944	0.2765
64.583	0.7035	0.7196	0.4944	0.553
64.667	1.6469	0.9445	1.0043	0.7421
64.75	4.2373	2.8186	2.7194	2.5029
64.833	2.8941	2.8186	2.6576	2.4738
64.917	2.1426	2.8336	2.4567	2.0373
65	12.472	2.6837	2.9512	2.4156
65.083	0.1279	1.8291	1.8232	1.7026
65.167	0.1759	11.5292	1.5451	1.4115
65.25	0.0959	0.1799	1.3752	1.9645
65.333	0.0959	0.2399	11.063	1.3679
65.417	0.1599	0.1349	0.2627	1.7317
65.5	0.1119	0.09	0.2318	10.4336

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.

a. Entitlement age is measured in 2-month increments; the notation "62.5" = 62 years and 6 months.

The changing distribution of entitlement ages also affects the average age at entitlement, a simple summary measure that may be useful to both researchers and policymakers. Chart 8 shows the average entitlement age for men and women by birth year, 1928–1940. For comparison purposes, we calculate the average only for those who have become entitled at ages 62 through 65 and 6 months. The average entitlement age for both men and women increased as the FRA rose, starting with those born in 1938 or later. Also suggested is that for every 2-month increase in the FRA, the average entitlement age has increased by approximately 0.65 to 1 month for men and 0.5 to 1 month for women. Increases in the average age at entitlement for those born in 1935 or later were probably caused by the influx of benefit claiming at the FRA following the removal of the earnings test.

Chart 8.
Average age ^a at entitlement, by sex and birth year

Show as table

Table equivalent for Chart 8. Average age ^a at entitlement, by sex and birth year

Birth year	Men	Women
1928	63.1404	62.9834
1929	63.1252	62.9349
1930	63.0892	62.9187
1931	63.0373	62.9110
1932	63.0618	62.9000
1933	63.0793	62.9451
1934	63.1492	62.9594
1935	63.2183	63.0080
1936	63.2221	63.0213
1937	63.2061	63.0172
1938	63.2910	63.0775
1939	63.3602	63.1639
1940	63.4149	63.2054

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.

a. Average age at entitlement shown in years and months and measured in 1-month increments.

Regression Analysis of Benefit Entitlement Status at Specific Ages

In this study, the range of age groups affected by the law changes differs over the study period. For example, those affected only by the earnings test removal 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. Persons reaching age 65 and 6 months through age 67 in 2005 are affected by both the earnings test removal and the gradual increase in the FRA. Further, those affected by the gradual increase in the FRA in 2000 turn age 62 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.

Instead, we estimate the effect of 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:

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; $\Delta \text{s}$  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 entitled year (2000, 2001, 2002, 2003, 2004, and 2005); and X is a vector of the individual's characteristics, such as race and sex. Effects of the earnings test removal and the increase in the FRA are identified by the  $\beta \text{s}$   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  $\beta \text{s}$   with one regression. Thus, we further subdivide the affected group into 7 subgroups according to their ages (Chart 2). We then estimate the effect of the rule changes in the 7 separate regressions, using the age 71–72 group as the control group. For example, the first regression includes those 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 previously seen in Table 2 and Chart 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 not the cumulative probability of entitlement at ages 71 and 72.¹²

In Table 4, we report estimates of 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.

Both the direction and the magnitude of the estimated effects accord with our expectations. For men aged 68 to 70, we estimate that benefit entitlement in 2000–2005 rises approximately 1 percentage point as a result of the earnings test removal in 2000. The effects are a bit larger for those who are aged 66, but they are still less than 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 FRA rule change offsets the effect from the earnings test rule change. For those age 65 in 2000–2002, the change in the earnings test rule increases benefit entitlement by slightly more than 3 percentage points for men and by slightly more than 2 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 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 Chart 2). Yet estimated effects are all negative and quite large for persons aged 62–64 in other years. A 4-month increase in the FRA results in declines 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 6-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 2.1, 3.3, and 3.5 percentage points for women at those same ages. Those estimates suggest that a relatively large response occurs at age 62 and relatively small but incremental responses at ages 63 and 64.

Following the gradual increase in the FRA, policymakers have asked whether people who are younger than the FRA would change their behavior. 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. As seen in Chart 4, among those who have reached the FRA a dramatic increase in the entitlement hazard occurs right after the earnings test rule change. The estimated marginal effects in 2000 for those aged 66 or older range from 18 (ages 68–70) to 29 (age 65) percentage points for men and 10 (ages 68–70) to 22 (age 65) percentage points 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 the earnings test removal in 2000 are reflected in estimates of the entitlement hazard for those aged 65 in 2000–2002. Estimated marginal effects in 2000–2002 are approximately 26 percent to 29 percent for men and 21 percent to 24 percent for women. Starting in 2003, that age group is affected not only by the earnings test removal but also by the gradual increase in the FRA. The estimated marginal effect at age 65 is small and statistically insignificant in 2003 but 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/year 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/year 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.

Concluding Remarks

This article investigates benefit-claiming behavior among fully insured males and females following the removal of the retirement earnings test in 2000 and the gradual increase in the full retirement age for persons who turn age 65 starting in 2003. Although results presented in this article are based on fairly rudimentary before-and-after analysis and reduced form difference-in-difference analysis, we find that significant responses occur in the age at entitlement around the time that those rule changes come into effect. Several key findings stand out.

• First, the largest effect of the earnings test rule change in 2000 occurs at age 65. At that age, the rate of benefit entitlement increases by more than 5 percentage points among men and 3 percentage points among women.
• Second, the removal of the earnings test significantly increases the benefit entitlement hazard by more than 20 percent for those turning the FRA.
• Finally, 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 their early retirement age.