Asset Tests

Changing Medicaid and SSI Rules to Encourage Retirement Saving

An important way policymakers can encourage low-income families to save for retirement is by removing the powerful savings disincentives posed by the asset rules in key means-tested benefit programs.  Two programs are in particular need of reform:  SSI and Medicaid.

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Background

Major means-tested benefit programs such as food stamps and Medicaid either require or allow states to apply asset tests when determining applicants’ eligibility.  Applicants whose assets exceed a specified dollar limit are ineligible for benefits, even if they have little or no income.  These asset tests penalize low-income people who have built modest savings and may discourage such saving in the first place.  By reforming the asset tests, policymakers can encourage low-income families to save for retirement.