A new Cornell University study analyzes the effects of personal preference when determining when to begin drawing from Social Security as well as the interventions aimed at helping people make reasoned decisions when claiming. The findings were published in the Journal of Marketing Research.
One of the key findings from the study was that considering the regret or needs of one’s “future self” is an important factor to consider when making decisions about retirement. However, the study found that societal norms regarding retirement are not as significant. This suggests that individuals should prioritise their personal goals and aspirations for retirement, rather than conforming to societal expectations. By doing so, they can better prepare for their future needs and avoid potential regrets in the long term.
“Everyone feels like their own working career is unique, their own family situation is unique, and their own life expectations are unique,” said Cornell SC Johnson College of Business Professor Suzanne Shu who helped lead the research. “And so, it might not be helpful to hear what other people are doing. There are so many variables that are really individual here, so talking about social norms doesn’t work here.”
For this work, the research team – which included researchers from the University of California, Los Angeles’ Anderson School of Management, as well as Bocconi University in Milan, Italy – conducted an experiment with more than 3,500 people between the ages of 40 and 61 (63% female), broken into 14 groups, including one control.
Thirteen groups of experiments were conducted, and they can be broadly classified into five types of interventions. The first type is framing payment information which involves breaking down payment amounts based on the age at which they will be claimed.
The second type is normative messages, which aim to establish what is considered “normal” behaviour.
The third type is the consideration of future selves, where participants anticipate the effects of their decision on their future selves.
The fourth type is information-based interventions, which provide contextual information about participants’ retirement needs.
Finally, the fifth type is self-reflection interventions, which include considering the downside risk of “living too long”.
By categorising the interventions, it becomes easier to analyze the results of the experiments and to identify which types of interventions were most effective.
Overall, the researchers found that claiming intentions are relatively difficult to influence, but several interventions seem to have more sway than others. Payment framing – pointing out the gains that could be had by waiting – was influential, as were considerations of future regret, concerns about life expectancy, and fact-based reasons why one might want to delay claiming the benefit.
“We were doing it almost as a horse race,” Shu said, “saying, ‘OK, here’s a bunch of different ideas of what might work, let’s put them all side by side and see which ones actually move the needle the most.’”
So, when’s the best time to claim Social Security? The researchers’ main takeaways do not offer a definitive answer to the question of when it’s best to start drawing the benefit. That will always be a personal decision; there is no right or wrong.