African-American families have known for generations that retirement at the age of 65 is often a mirage. We hope and pray it will happen, but it’s a dream that generally never gets fulfilled. In fact reports have shown that the typical White family - even at retirement age - has eight times the wealth of the typical Black family, with a typical Latino family faring only slightly better. These historic inequities will not change by themselves. Community leaders, policymakers, and industry experts must come together to identify and promote new solutions to this retirement wealth gap.
Opportunely, a new research study by the Bipartisan Policy Center (BPC) a Washington, DC based think-tank and investment manager BlackRock offer ideas and solutions that provide a wholistic approach to retiring, presenting a framework that any person – across all races, genders, and socioeconomic statuses – can utilize to extend and expand their retirement savings.
Americans are Generally living longer than they were in previous decades, while the official retirement age is largely unchanged. Today, 58 percent of U.S. adults are worried they will outlive their retirement savings. And they’re right to be concerned; most Americans are not saving enough for their retirement. African-Americans are at greater risk for instability during retirement years. The AARP has shown the gaps in retirement savings already. The association representing millions of retirees across the country has pointed out that Black and Hispanic workers lag in access to workplace savings plans. On average, Black retirees in the United States have less saved for retirement than their White counterparts. Racial disparities in homeownership and generational wealth also contribute to discrepancies in retirement savings. And, for all, the prospect of retirement is stressful and overwhelming. The opportunities to learn common sense retirement savings techniques are lacking.
However, there are solutions. There are simple actions that both individuals and policymakers can take to bridge this gap. The BPC and BlackRock research paper outlines several key findings which would allow for the typical American to save for retirement with a “spending floor” or the hard-dollar levels under which they cannot spend each year as a retiree ages into their 90s and beyond.
Essentially, the study found that savers should consider a three-step framework to help chart their path to retirement spending:
- Determine retirement objectives,
- Consider key risk factors and
- Formulate a holistic strategy. One additional tip they provide is that pulling a few levers within the framework – such as increasing Social Security benefits by claiming this benefit later and adding guaranteed income – can significantly boost long-term spending power.
The simple building of wealth, such as retirement savings, can help buffer racial minority families and provide critical support for families during economic downturns. For example, Black families with mortgages were three-times more likely to get behind on mortgage payments than White families. The economic legacy of COVID-19 has been devastating for Black people and other racial minorities, further increasing the racial wealth divide, and aggravating historic issues that have made it more difficult for Black Americans to thrive.
The study addresses disparities among race and other historical demographic issues that pervade many of these financial challenges. For example, Black Americans generally have shorter life expectancies and more health issues than white Americans. On average, Black workers earn less putting them at a significant disadvantage from when their careers start, making it more challenging to save. Far fewer Black families have retirement accounts – or investments generally – than White households. Meanwhile, current “tax subsidies for asset building disproportionately benefit the highest-income households,” the report says.
The BPC and BlackRock study concludes that policymakers must play a key role in equalizing retirement across races. Our nation’s lawmakers should collaborate with the private sector in creation and passing policies, such as, “minimizing early withdrawals from retirement accounts, known as plan leakage; expanding guaranteed lifetime income products and home equity tools to support consumption; and promoting optimal times to start collecting Social Security benefits.” This will advance much-needed expansive and equitable financial stability in retirement.
Every American deserves to retire comfortably at an age that one can still enjoy it. That requires saving in advance, in the most lucrative but safe way possible. It’s time to bridge the gap on retirement age and savings among the races within the United States. The Bipartisan Policy Center-BlackRock research paper offers tactful solutions that individuals should implement and policies that legislators should consider. Savers across all races should have straightforward retirement knowledge and savings options.