This paper examines the interaction between precautionary saving and social insurance programs, particularly those with asset-based means testing. It argues that a life-cycle model can explain observed patterns in household wealth accumulation when explicitly accounting for precautionary saving and asset-based social insurance. The paper demonstrates that social insurance programs with means tests based on assets discourage saving by households with low expected lifetime income. It also evaluates the model using a dynamic programming model with four state variables, showing that low-income households are more likely to hold virtually no wealth. This is explained as a utility-maximizing response to asset-based means-tested welfare programs. The paper uses microdata from the Panel Study of Income Dynamics (PSID) to show that wealth accumulation patterns differ by lifetime income, with lower-income households accumulating less wealth. The paper concludes that asset-based means-tested social insurance programs have a disproportionate impact on saving behavior of lower-income households.This paper examines the interaction between precautionary saving and social insurance programs, particularly those with asset-based means testing. It argues that a life-cycle model can explain observed patterns in household wealth accumulation when explicitly accounting for precautionary saving and asset-based social insurance. The paper demonstrates that social insurance programs with means tests based on assets discourage saving by households with low expected lifetime income. It also evaluates the model using a dynamic programming model with four state variables, showing that low-income households are more likely to hold virtually no wealth. This is explained as a utility-maximizing response to asset-based means-tested welfare programs. The paper uses microdata from the Panel Study of Income Dynamics (PSID) to show that wealth accumulation patterns differ by lifetime income, with lower-income households accumulating less wealth. The paper concludes that asset-based means-tested social insurance programs have a disproportionate impact on saving behavior of lower-income households.