Data and Code for: How Social Security Reform Affects Retirement and Pension Claiming

We study pension claiming and retirement in the context of a large reform that independently shifts the two principal levers of social security, the statutory full retirement age (FRA) and the pension benefit schedule. The reform first increased the full retirement age while keeping early retirement financially attractive. Exploiting the sharp cohort cutoffs generated by the reform, we find that increasing the FRA by one year delays pension claiming by 7-8 months and labor market exit by 5-7 months, responses that are much larger than a benchmark life-cycle model predicts. In a second step, the same reform made late claiming financially more attractive while keeping the FRA constant. This second reform step has no effect on retirement but delays claiming by about 4 months, which is smaller than the benchmark predicts. Survey evidence on individuals' motives for claiming and retiring suggests that claiming behavior is directly affected by the FRA increase through reference dependence with loss-aversion, while adjustment in the retirement age can be attributed to two separate forces. First, many individuals indicate a preference to claim benefits and retire at the same time, so that claiming age adjustments in response to the reform spill over into retirement decisions. Consistent with this, we show that the retirement response in our data is fully driven by individuals who couple claiming and retirement. Second, there is also a direct effect, as the FRA is also viewed by some as a "normal" retirement age.Finally, we show the fiscal multiplier associated with the first step of the reform is 1.3 to 1.9, larger than that of the second step (0.7 to 1), mainly because of the less than actuarially fair adjustment of pensions in the first step.