Disability shocks near retirement age and financial well-being

Using Health and Retirement Study data, we examine three groups of adults aged 51-56 in 1992 with different disability experiences over 8 years. Our analysis reveals three major findings. First, people who started and stayed nondisabled experienced stable financial security, with improvement in household wealth despite labor force withdrawal. Second, the newly disabled--people who started as nondisabled but suffered a disability shock--experienced increased poverty rates and decreased median incomes. Average earnings loss was the greatest for them, with public and private benefits replacing less than half of the loss, whereas increased public health insurance coverage alleviated reduced private health insurance coverage. The newly disabled experienced improvement in household wealth, although at a lower rate compared with those who stayed nondisabled. Third, people who started and stayed disabled were behind at the baseline and have fallen further behind on most measures, except for improvement in health insurance coverage.