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Social Security Reform and Its Effects on Participation in the Supplemental Security Income Program

With Social Security facing the financial challenges associated with an aging society, some adjustments will be required to ensure that it remains strong for future generations. Numerous options and combinations of options for reform have been proposed. Many entail some reduction in benefits for future beneficiaries. For future low-income workers it is logical to assume that, should their income, due to lowered Social Security benefits, fall below Supplemental Security Income (SSI) thresholds, they would be eligible for benefits from this program designed to reduce poverty among the aged, blind, and disabled.

In this AARP Public Policy Institute Issue Paper, Melissa M. Favreault, Jillian A. Berk and Karen Smith of the Urban Institute use the Institute's dynamic microsimulation model (DYNASIM) to determine the potential effects on SSI of five Social Security reform options that would reduce guaranteed benefits:

  • using price indexing rather than wage indexing in the formula for calculating initial benefits
  • decreasing the cost-of-living adjustment
  • eliminating the hiatus for birth years 1943-1954 in the gradually increasing age for full retirement and indexing full retirement age to life expectancy
  • using the factors in the previous option and increasing early eligibility age to 64
  • increasing the number of years included in the computation of benefits from 35 to 38

This research underscores the importance of conducting in-depth analysis of all proposed Social Security reform options and their impact on various groups in the population before changes are made. (53 pages)

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