Here’s an Interesting Twist on Social Security That Might Be Worth Trying

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


Via Matt Yglesias, here’s a fascinating little study in behavioral economics. It involves Social Security, which currently allows you to retire at age 62, but offers you a higher monthly payment if you retire later. For example, if you retire at 62, your monthly benefit might be $1,500, but if you delay a year, your monthly benefit might go up to $1,600. Given average lifespans, the total payout works out the same in both scenarios.

But what if you offered retirees a different deal? What if, instead of a higher monthly benefit, you offered them a lump sum payout if they delayed retirement? In the example above, if you delay retirement to 63, you’ll still get $1,500 per month, but you’d also get a $20,000 lump sum payout. Delay to age 70 and you’d get a lump sum of nearly $200,000. How do people respond to that?

It turns out that they delay retirement—or they say they would on a survey, anyway. Under the current scenario, people say they’d retire at 45 months past age 62, or 65 years and 9 months. Under the lump sum scenario, the average retirement age is about five months later. (A third scenario with a delayed lump sum payout motivates people to retire even later.)

Would people do this in real life if they were offered these options? Maybe. And it would probably be a good thing, as Yglesias explains:

Since the benefits would be actuarially fair, this would not save the government any money. But since people would be working longer, the overall size of the economy and the tax base would be larger. That extends the life of the Social Security Trust Fund, and helps delay the moment at which benefit cuts or tax increases are necessary. The overall scale of the change is not enormous, but it’s distinctly positive and it’s hard to see what the downside would be.

This is hardly the highest priority on anybody’s wish list, but it’s an intriguing study. And it would certainly be easy to implement. Maybe it’s worth a try.

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate