Academic journal article Social Security Bulletin

Low Levels of Retirement Resources in the Near-Elderly Time Period and Future Participation in Means-Tested Programs

Academic journal article Social Security Bulletin

Low Levels of Retirement Resources in the Near-Elderly Time Period and Future Participation in Means-Tested Programs

Article excerpt

This article describes the de facto standards of low income and resources reflected in the eligibility standards of the largest means-tested programs that serve the elderly and then applies these standards to a near-elderly cohort. Through juxtaposing retirement resources in the near-elderly time period with program participation in the elderly time period, the author indirectly examines some of the changes between the two time periods that could affect program eligibility, including spend-down of resources and marital dissolution. Retirement resource levels are estimated using the Survey of Income and Program Participation, and subsequent participation in one of the means-tested programs-Supplemental Security Income (SSI)-is examined using matched administrative records. Although spend-down of resources is shown to occur for only 8.7 percent of eventual SSI program participants, it is more common in the part of the near-elderly population that faces the greatest incentive to decrease resource levels.

Introduction

This article examines the segment of a near-elderly cohort that has low retirement resources to answer three research questions. First, who are the people who have very low levels of retirement resources in the near-elderly time period? These individuals are described in terms of demographics, current financial situation, and lifetime labor force attachment. Second, what is the relationship between having low retirement resources in the near-elderly time period and participation in the Supplemental Security Income (SSI) program upon reaching age 65? Third, what changes in the years just before turning age 65 can affect future eligibility in means-tested programs? Two potential changes are examined: spend-down of resources and marital dissolution.

Rather than using current-period income, a broad measure of retirement resources is used, which includes wealth holdings and the potential Social Security benefit for which the person would be entitled upon claiming. The focus here is on the population whose levels of income and resources would make them eligible for one or more of the means-tested programs that serve the elderly, if they were otherwise eligible.1

I establish unified eligibility criteria under which an individual could be financially eligible for any of the three largest means-tested programs. The three programs are considered together because they may create joint behavioral incentives. The unified criteria represent upper-bound eligibility measures for thresholds that vary across the three programs and, in some cases, also across states.

These thresholds are used to examine potential future financial eligibility for means-tested programs among those in a near-elderly cohort. This cohort has generally not reached the age of categorical eligibility for these programs,2 but financial eligibility is evaluated with an eye toward future eligibility and possible participation. Eligibility in the near-elderly time period is compared with later receipt of benefits from one of the three programs, the SSI program.

I reach several broad conclusions about the near-elderly population with low levels of retirement resources. Individuals in this group have had low labor force attachment over the course of their lifetimes, both in terms of the frequency and level of earnings. For about half, the lifetime earnings patterns were affected by disability. Further, the near-elderly population with low retirement resources has different marital histories than the remaining near-elderly population. This affects well-being in both the near-elderly and elderly time periods. Not only can the presence of a spouse affect family income and poverty status in the near-elderly time period, but the earnings history of a spouse can also increase the potential Social Security benefit.

Among those with low retirement resources in the near-elderly time period, the rate of SSI payment receipt upon reaching age 65 varies by a number of financial factors. …

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