Health, Wealth & Workforce Exit: Disability Insurance & Individual Accounts

Jason S Seligman, University of Georgia

Retirement historically stemmed from a disability to continue work, motivating an integrated approach to the social insurance programs within OASDI. Current debate on the long-term finance of OASDI benefits includes proposals for private investment via Individual Accounts. This paper investigates what implications disability might have for account balances, simulating returns for cohorts retiring over the period of 1929 - 2003. Next, a behavioral model explores incentives to exit the workforce ahead of retirement age when either of two variants of the current Disability Insurance program continues to be available. Under either program, incentives are found to increase public Disability Insurance liabilities.