Fiche du document
28 mai 2021
- 2106.00125
Mots-clés
Physics - Physics and Society Economics - General Economics Mathematics - Optimization and ControlSujets proches
Fortunes Riches Affluence Distribution of wealthCiter ce document
Steven Diamond et al., « Optimal Claiming of Social Security Benefits », arXiv - économie
Partage / Export
Résumé
Using a lifecycle framework with Epstein-Zin (1989) utility and a mixed-integer optimization approach, we compute the optimal age to claim Social Security benefits. Taking advantage of homogeneity, a sufficient statistic is the ratio of wealth to the primary insurance amount (PIA). If the investor's wealth to PIA ratio exceeds a certain threshold, individuals should defer Social Security for at least a year. The optimal threshold depends on mortality assumptions and an individual's utility preferences, but is less sensitive to capital market assumptions. The threshold wealth to PIA ratio increases from 5.5 for men and 5.2 for women at age 62 to 11.1 for men and 10.4 for women at age 69. Below the threshold wealth to PIA ratio, individuals claim Social Security to raise consumption. Above this level, investors can afford to fund consumption out of wealth for at least one year, and then claim a higher benefit.