Social Security Claiming Intentions: Psychological Ownership, Loss Aversion, and Information Displays

For many Americans the question of when to claim Social Security benefits is one of the most consequential financial decisions they will ever face. While acknowledging that individuals differ in terms of optimal timing for starting Social Security benefits, many economists argue that an average person would benefit from delaying claiming as long as they could. Yet this is not what average Americans do. Many more Americans claim as soon as possible, at age 62, rather than as late as possible, at age 70. Why? This paper focuses on individual differences in beliefs and values that influence Social Security claiming intentions. As expected from economic theory, individual differences in life expectations and degree of patience for later larger payouts relate to claiming intentions. In addition, however, we also find that individual differences in psychological ownership of one’s Social Security benefits and individual differences in degree of loss aversion are both significant predictors of Social Security claiming intentions. Further, we find that an “enriched” information display manipulation (nudge) that emphasizes longer-term consequences of late claiming leads to earlier, not later, claiming intentions, and that the size of this effect is related to individual differences in the degree of loss aversion.