Learning from the lab: Reframing social security retirement benefits
- Interventions
- Benefit framing, Benefit framing
- Experiment Type
- Lab Learning
- Goals
- Withdraw less
- Outcomes
- Increase long-term savings
- Focus Areas
- Marketing & messaging
- Behavioral Concepts
- Framing
What Happened
It is unclear. While no condition outperformed the control, the fact that several conditions significantly differed suggests that framing could make an impact in claiming preferences
It is unclear. While significance wasn't explicity mentioned, it seems that the low anchor condition was the strongest alternative to positively impact claiming preferences compared to a control or high anchor.
Lessons Learned
While there were significant differences between the low anchor and two other conditions, none of the conditions were singificantly different than the control.
Whie significance wasn't explicity discussed, providing a low anchor (reaching 100% benefits by age 70) led to the most promising results with regard to claiming preferences.
Background
Americans are worried about having enough money to retire. Many Americans aren’t saving for retirement or haven’t saved enough. Furthermore, those that do have savings are faced with a terribly difficult decision — when to claim their benefits? People that claim their benefits too early leave extra money on the table. People that claim their benefits too late, though, might not get the most from their savings. Like Goldilocks and her fabled porridge, American retirees need to claim their benefits when it is “just right”.
Finding the age that’s “just right” is difficult –the majority of Americans likely do not know when they should claim their benefits. Instead, most are claiming Social Security as soon as they are eligible to do so. People may be claiming too early because they rely on heuristics or environmental cues when deciding when to claim their retirement benefits.
Key Insights
We hypothesized that perhaps the Social Security Administration is framing information about benefits in a way that encourages people to claim social security as early as possible. According to the US Social Security Administration, there are early, full, and delayed retirement ages. At these three ages, respectively, retirees born between 1943-1954 are entitled to 75%, 100%, or 132% of their retirement benefits.
The percentages are intended to convey that your savings will grow as you delay your claim, but framing them as more than 100% may lead people to treat delaying differently than if it is simply summed to 100%. People might just want the full amount they are entitled to and are less motivated to wait for a “bonus.” Therefore, we designed two experiments to investigate how the framing of “full retirement benefits” affects people’s preferences for when to claim their benefits.
Experiment
To test our hypothesis, we designed two experiments where participants viewed different presentations of key retirement ages and were asked when they desired to claim their social security benefits.
In the first experiment, we varied the names of age categories to be either “Full, Standard, Delayed”, “Standard, Full, Delayed”, or “Standard, Delayed, Full.” Some participants were also randomly shown either a control, where the percentages and names aligned with the way the SSA currently displays retirement benefits information, or a low anchor, where percentages were reframed so that retirement benefits would only reach 100% at age 70.
The second experiment was a follow-up to the first. In this study, participants were again randomly assigned to the control condition or the low-anchor condition from the first study. Here we added a third, high anchor, condition where retirement benefits were presented so that someone would reach 100% of their retirement benefits at the earliest retirement age (62). If they waited to age 70, they were eligible for 176% of their retirement benefits. Afterwards, participants were again asked at what age they desired to claim their benefits.
Results
In study 1, participants in the low-anchor group reported that they would wait the longest to claim their benefits. This difference was statistically different from two of the name groups. There were no differences, however, in claiming ages between control and all other conditions. Given these differences, it appeared that the framing of percentages in retirement benefits uniquely affected participants’ preferences.
In study 2, participants who were told they would reach 100% of their benefits at age 70 were willing to wait about a year longer before claiming their retirement benefits compared to the control. Participants who were told that they reached 100% of their retirement benefits at age 62 were willing to wait about 1 year less than the control.
Taken together, these results suggest that how we communicate retirement benefits can significantly influence peoples’ social security claiming preferences. Moreover, the way that the SSA currently frames benefits likely encourages people to claim their retirement benefits at or before age 66.