As Congress considers legislation to encourage retirement saving, it should correct one of the most regressive, anti-saving provisions in federal law by finally updating the woefully out-of-date asset limits in the Supplemental Security Income (SSI) program, which provides monthly cash assistance to nearly 8 million older and disabled people with very low incomes.
SSI benefits are quite modest — the maximum is only three-fourths of the federal poverty line — leaving 4 in 10 beneficiaries in poverty even with their benefits. Further, with narrow exceptions (such as a primary residence), the rules limit beneficiaries’ savings and assets to a mere $2,000 (or $3,000 for a couple); anyone exceeding these limits is disqualified from the program. These limits have been frozen for nearly 40 years, which has dramatically weakened the program.
When creating SSI in 1972, policymakers set asset limits that let beneficiaries have some savings to cover the cost of emergencies. Legislation enacted in 1984 raised the asset limits but didn’t automatically adjust them for inflation, leaving beneficiaries largely unable to save for an accident, unexpected repair bill, or other expense — and completely unable to save for their future.
Had SSI’s asset limits been indexed to inflation since 1984, they’d be more than twice as high as they are today. Had they been indexed since 1972, they’d be more than four times as high.
Despite growing recognition by bipartisan policymakers and analysts that having an asset cushion boosts economic security, SSI’s limits continue to penalize saving. When the Senate considers the House-passed SECURE 2.0 bill, which aims to improve retirement security for many Americans, it should consider adjusting SSI’s outdated asset limits.
One option would be to add a new bipartisan proposal from Sens. Sherrod Brown (D-Ohio), Rob Portman (R-Ohio), Ron Wyden (D-Ore.), Bill Cassidy (R-La.) and Tim Scott (R-S.C.) to raise the SSI asset limits to $10,000 (for individuals) and $20,000 (for couples), and index them to inflation going forward. Changes along these lines were recently embraced in a June report by a National Academy of Social Insurance bipartisan economic study panel, of which we were all members. Public polling suggests wide bipartisan approval, with 78 percent supporting increasing the asset limits. Another reform would be to exempt some or all retirement savings from these limits, as was recommended in a Bipartisan Policy Center commission report. These changes would enable more older and disabled people with modest savings and very low incomes to get needed support through SSI.
Reforming SSI’s asset limits would also reduce red tape. Though very few people with incomes low enough to qualify for SSI have substantial assets (or any at all), administering the program’s extremely low asset limits creates significant challenges for applicants, beneficiaries and the Social Security Administration (SSA), which is already underfunded and faces work backlogs.
Each year approximately 70,000 beneficiaries have their benefits suspended and another 40,000 have their benefits terminated for failing to adhere to the asset rules by having “excess resources.” In some cases, beneficiaries exceed the limits only temporarily — for example, by accruing interest in an emergency savings account that was previously under the limit. In other cases, they remain below the limit but can’t produce the necessary documentation to prove it.
When benefits are suspended, beneficiaries must reestablish eligibility, and when they are terminated, they must restart the application process from the beginning. All this creates additional work for both the beneficiary and SSA.
If asset limits were set at a more reasonable level, fewer beneficiaries would exceed them. This would significantly reduce the number of overpayments, suspensions and terminations and reduce burdens on both SSI beneficiaries and SSA staff. It would also enable more low-income people who need support to qualify for SSI benefits — particularly seniors, who are likelier to have some modest savings. SSI improvements also are especially important for people of color, who make up a majority of beneficiaries.
Since SSI beneficiaries who exceed the asset limit could lose not just SSI but also other benefits where eligibility is tied to SSI receipt, such as Medicaid and housing assistance, a prudent beneficiary currently has the perverse incentive to avoid saving too much. This runs directly counter to many other federal policies aimed at encouraging self-sufficiency and asset building. Savings and assets play an important role in improving economic stability for low-income individuals, a large body of research shows, including new analysis by JPMorgan Chase that recommends raising SSI’s asset limits.
Updating SSI’s asset limits to account for past and future inflation and encourage saving is a bipartisan policy ripe for passage.
Kathleen Romig is director of Social Security and Disability Policy at the Center on Budget and Policy Priorities. Rebecca Vallas is a senior fellow and co-director of The Century Foundation’s Disability Economic Justice Collaborative. Jason Fichtner is vice president & chief economist at the Bipartisan Policy Center.