The Material Well-being of Disabled Retirees: Evidence from the PSID

This study aims to provide a comprehensive picture of the prevalence and well-being of pre-retirement disabled individuals, as they enter retirement. Though the number of Social Security Disability Insurance claimants has risen over the last few decades, the impact of pre-retirement disability on a retiree’s economic well-being remains relatively unexplored. Using a sample of the male household heads from the Panel Study of Income Dynamics over 1968–2013, we examine the prevalence of pre-retirement disability and the material well-being of those disabled during their prime working ages as they transition into retirement. While the literature documents that chronic and severe disability reduces an individual’s economic well-being for many years, we find that this negative consequence persists for income and consumption as the disabled enter their retirement phase, despite the availability of retirement benefits and Medicare. Those disabled at a younger age appear to be faring poorer compared with those disabled at an older age. Time use data do not suggest conclusively that the disabled increase home production as they enter retirement to compensate for lower expenditures on food and housing. Our results will be important in further understanding old-age poverty and the adequacy of current policies.