The Impact of Rising Interest Rates on the Optimal Social Security Claim Age

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Abstract/Contents

Abstract: Individuals are eligible to claim Social Security benefits between the ages of 62 and 70. While the actuarial present value of benefits for each individual is supposed to be unchanged, regardless of the age at which they are claimed, previous research has shown that this is not true. This paper aims to analyze the impact that interest rates have on the present value of the benefits and attempts to study how different interest rate expectations affect the optimal age at which to claim Social Security. The methodology used in this paper differs from that used in previous studies; I introduce a dynamic interest rate model based on forward rates under both a deterministic and stochastic approach to calculate the Net Present Value associated with different claim ages so as to identify the optimal claim age. The results of this paper display that under certain assumptions, it is advantageous for both men and women to begin claiming retirement benefits early – between the ages of 62 and 65. Moreover, the results indicate that there are significant losses associated with delaying claims beyond the optimal claim age.

Type of resource	text
Date created	May 2014

Author	Chugh, Shaan
Primary advisor	Goda, Gopi Shah
Degree granting institution	Stanford University, Department of Economics

Subject	Social Security
Subject	Net Present Value
Subject	Retirement Benefits
Subject	Stanford Department of Economics
Genre	Thesis

Location	https://purl.stanford.edu/xb200nk3683

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Preferred Citation: Chugh, Shaan. (2014). The Impact of Rising Interest Rates on the Optimal Social Security Claim Age. Stanford Digital Repository. Available at: https://purl.stanford.edu/xb200nk3683

Stanford University, Department of Economics, Honors Theses

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