More on behavioral economics and social security

Peter Orszag responds to yesterday’s post about the relevance of penalties on wage earnings before reaching full employment age – also known as the retirement earnings test.

It is true that if people don’t understand how the retirement earnings test (RET) works, knowing that it no longer applies starting at the full benefit age could cause some people to claim at that age. (Those who do understand the RET know that the recalculation that occurs when a beneficiary subject to the RET reaches the full benefit age compensates them for the benefits offset while they were still working – again making the benefit actuarially fair).

Continue reading the post here.

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