Association for Public Policy Analysis & Management

Individual financial planning for retirement in the US is increasingly important, given the trend away from employer-provided defined benefit (DB) plans, the rising Social Security (SS) Full Retirement Age (FRA), and retiring baby boomers. A key financial decision that Americans make is how to draw on their retirement wealth across various sources, including both privately saved retirement funds and SS benefits. For SS retirement benefits, the main decision is at what age to claim, with claiming before the FRA resulting in lower monthly benefits, and claiming later leading to higher benefits. The terms of this tradeoff have changed in recent years: since 2003, the FRA has risen from 65 and will gradually increase to 67 by 2027, representing a drop in the present value of SS benefits. Meanwhile, defined contribution (DC) plans have gained massively in popularity, presenting retirees with more control over their private retirement wealth. The changing dynamics of both SS wealth and the private retirement decision space underscore the need for examining how individuals make decisions across their entire portfolio of retirement wealth. We use HRS survey data matched to SS administrative data to study how households integrate SS benefits into their general retirement income plans. We find starkly different patterns of private retirement wealth decumulation among individuals claiming SS benefits at different ages, with earlier claimants experiencing falling levels of this wealth and a greater likelihood of cashing out IRAs and pension plans. We will explore the behavioral responses - labor supply, asset holdings, and pension decision-making - to falling SS wealth levels as well.