Research Marketing

Nudging Americans to Delay Social Security Claiming

, by Jenny Mao
Research by Adam Eric Greenberg analyzes the psychological factors which affect the decision to claim retirement benefits at an earlier or later age

To nudge people to delay Social Security Administration (SSA) claims, highlighting financial benefits, showing that delaying is the right choice, and getting people to self-reflect may be beneficial, according to a paper forthcoming in the Journal of Marketing Research by Adam Eric Greenberg, Assistant Professor of Marketing at Bocconi, and coauthors from Cornell University and the University of California, Los Angeles.

Choosing when to claim SSA retirement benefits is one of the most important financial decisions older Americans make. Consumers can start receiving their monthly payments as early as age 62, with the full retirement age between 66 and 67, depending on the individual's birth year. The exact value of monthly payments depends on a number of factors, including the recipient's earnings history and age at which they begin receiving benefits. If an individual chooses to claim early, their monthly payment will be permanently reduced. For example, if an individual has a full retirement age of 66 and chooses to begin receiving benefits at age 62, their monthly payment may be reduced by up to 30%.

"When it comes to funding your retirement, deciding when to claim Social Security is highly consequential," Professor Greenberg explained, "It is also complex. While delaying benefits can result in a higher monthly payment, it may not always be the best option since it depends on an individual's financial situation and life expectancy. Beyond all these economic issues, this work studies this substantive problem by focusing on psychological factors in the claiming decision."

The authors considered an extensive set of psychological processes that could determine claiming age intentions in four large-sample studies. The main experiment contained one control group and 13 different interventions, with approximately 4,500 participants aged 40 to 61. Five classes of psychologically informed interventions in 13 experimental treatment sessions were used to nudge individuals toward delaying claiming:

Payment framing: changing the way payment information is presented.
Normative messaging: providing information about what other people do or what people ought to do.
Consideration of future selves:asking people to picture their future selves and anticipate the benefits of claiming decisions on their future selves and families.
Information: explaining the potential that retirement funds are not sufficient and the frequency of regret.
Self-reflection: asking people to think up their own reasons to claim earlier and to consider the downside risk of living into old age.

"We were surprised that losses framing did not affect claiming while highlighting financial benefits often did," Prof. Greenberg said. "The self-reflection treatments were promising. For example, when asking individuals to consider other people they know who have lived long into their retirement, they consider that they might live for a long time as well. Different people have different expectations about longevity, which is immensely important."

Indeed, this work highlights that SSA claiming is a unique decision that depends on countless individual and psychosocial factors. Reasonable signals of longevity or greater financial resources may lead people toward claiming later. "This research gave us a lot of insight into what might work and what might not work. We ran three replication studies after obtaining several null effects in our first study." Interventions that asked people to focus on their future selves and those that provided useful information were not effective despite having been demonstrated influentialin other financial domains. "This suggests that it is important to consider substantive differences between financial choices," Prof. Greenberg concluded.

The work was supported by a grant from the U.S. Social Security Administration, as part of the Retirement Research Consortium.

Adam Eric Greenberg, Hal E. Hershfield, Suzanne B. Shu, Stephen A. Spiller, "What Motivates Social Security Claiming Age Intentions? Testing Behaviorally Informed Interventions Alongside Individual Differences." Forthcoming in Journal of Marketing Research.