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

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