The Interaction of Public Retirement Income Programs in the U.S

Theory suggests that the combined influence of the two public retirement programs in the United States - social security and SSI - encourages both SSI participation and early old-age insurance (OAI) claims under social security. Using SSI participants' social security earnings records, we find that prospective SSI recipients have strong financial incentives to claim OAI as soon as possible. The design of SSI induces an annual loss in old-age transfer wealth of around 7 percent when retirement is delayed from age 62 to age 65. Moreover, the patterns of early OAI claims among SSI-aged recipients and the patterns of age at first SSI claims for those eligible for OAI are consistent with individuals responding to the incentives for early retirement and SSI participation posed by the SSI-OAI interaction. Given whom SSI serves, this topic is of general interest for understanding the retirement process of very low-income people (especially its timing) and the potential supports that enable their retirement. If work plans are made contingent upon the structure of public programs, changes to OAI or SSI rules could have a substantial effect on retirement patterns among this group. Furthermore, changes to either social security or SSI could have unanticipated spillover effects on the other program