Supporting Seniors: How Low-Income Elderly Individuals Respond to a Retirement Support Program

Abstract

Longer life expectancy and insufficient savings expose individuals to financial vulnerability in older ages and prompt government support measures. We study a government subsidy program for the low-income elderly population in Singapore. Using comprehensive, high-frequency transaction data, we estimate a marginal propensity to consume (MPC) out of the permanent income increases of 0.7, driven by precautionary savings and bequest motives. More liquidity-constrained recipients exhibit an MPC of 1. We find no evidence of income substitution or other strategic behaviors. We discuss implications for program eligibility, payment frequency, and distribution form in policy design.

Keywords: retirement support, cash transfer, liquidity constraints, financial vulnerability in retirement, consumer finance, precautionary savings, bequest motives

JEL Classification: D12, D14, H24, H55, J14, J26