The Effect of Means-Tested Income Support for the Elderly on Pre-Retirement Saving: Evidence from the SSI Program in the U.S.

Abstract

We attempt to draw inferences about potential behavioral responses to income support for elderly by examining effects on saving of Supplemental Security Income (SSI) program for aged in U.S. Part of SSI program provides payments to the poor elderly, thus operating as a means-tested public retirement program. The government sets criteria and benefit levels for federal component of program but many states supplement federal SSI benefits substantially. We exploit state-level variation in SSI benefits to estimate effects of SSI on saving. We use data from selected waves of 1984 Survey of Income Program Participation (SIPP). We find evidence that high SSI benefits reduce saving among households with heads who are approaching SSI eligibility age and who are likely participants in program.