Happy senior couple embracing lovingly.

Retiring While Black: Part 1

Ready, set, go! Well, after 43 years of being a public servant, I finally hit the button and submitted my notification to retire! Is there more I can contribute to the workplace? Yes. Am I really ready to retire? I believe so. Emotionally, yes. Financially? Hmmm.

Since the onset of the pandemic, there has been a constant increase in retirement. Whether this rise in numbers is due to the pandemic itself, fear in general or not wanting to return from remote working to in-person, people are exiting the workplace. Many may have retired without being ready to. However, when you know it’s time to retire, you just know. As I think about retirement and prepare to leave, I’ve learned that it is quite different when it comes to how, we as Black people, as opposed to white people, save or don’t save, or invest or don’t invest. Why is this? Top reasons are disparities, inequity, and inequalities.

The Disparities

Inequalities put many Black people on poor footing for retirement. When you consider unemployment statistics, to be young, employed, and Black may seem like its own victory. That’s even more true if you have a job you call a career and a professional future that looks bright. Many Black people who are now of retirement age have not been so fortunate, and many pre-retirees continue to live paycheck to paycheck. I’ve felt like this from time to time.

Looking at how the Black community fares in terms of retirement readiness, the statistics give cause for alarm. Compared with whites, longstanding disparities in opportunities for Black people have led to disparities in wealth and in channels to build it, like homeownership and participation in retirement accounts. According to the Center for Global Policy Solutions – a nonprofit think tank dedicated to advancing economic security for vulnerable populations – Black seniors do not have the assets they need for retirement.

In fact, the Federal Reserve’s 2019 Survey of Consumer Finances indicates Black families have considerably less wealth than white families — a median net worth of $24,100 compared with $188,200. Wow!

There are also significant differences when it comes to the intergenerational transmission of wealth. Younger Blacks are less likely than whites to benefit from family money that could help with the down payment for a home or provide other kinds of financial lift-off. In fact, the Federal Reserve report notes that by some estimates, the differences in inheritances and other family support is the main reason for the racial wealth gap.

Retirement Crisis Black Americans Face

When it comes to vehicles for retirement savings, Blacks are less likely to have retirement savings accounts, like 401(k)s or pensions. This is partly because they are less likely to work for an employer that offers them. Of those who do, participation rates are also lower. Retirement accounts held by Blacks have little more than a third of the balance of accounts owned by whites, according to a 2016 analysis of Federal Reserve data.

All of these problems and more—systemic oppression and bias in housing, healthcare access, and educational opportunity, as well as employment and wage inequality—have combined to make retirement insecurity a pressing issue for Blacks, says Shawn D. Rochester, author of The Black Tax: The Cost of Being Black in America. “This anti-Black bias manifests itself in the form of discriminatory behavior that results in a quantitative economic cost which has an intergenerational effect on Black Americans at all levels and dramatically increases retirement insecurity,” he says.

Income and Wealth Inequity

Long-standing income and wealth disparities along with low savings rates have endangered retirement readiness for millions of elderly Black Americans. The major retirement crisis facing Black Americans involves many issues including historically low homeownership, lack of legacy planning, and generational wealth.

Black families generally have lower incomes than white families, which makes it more difficult to save for retirement. White families had median and mean family wealth of $188,200 and $983,400, respectively. The median and mean wealth of Black families is less than 15% that of white families, at $24,100 and $142,500, respectively.

Low Savings Rates and Stock Market Participation

Black Americans often don’t participate in retirement accounts at work and don’t get the advantage of stock market growth. Only 44% of Black Americans have retirement savings accounts, with a typical balance of around $20,000. However, 65% of white Americans have an average balance of $50,000. Only 34% percent of Black Americans own any stocks or mutual funds, compared to more than half of white people. We need to stop being so afraid of investing. Investing even a small amount in a 401(k) plan or IRA can help you to accumulate wealth over time.

Retired Black Americans Depend Heavily on Social Security

Those who don’t save enough for retirement often come to rely on Social Security. According to the U.S. Social Security Administration, about 38% of minority beneficiaries rely on Social Security for 90% or more of their income, compared with 28% percent of white people.

Social Security benefits can be lower for Black Americans because benefits are based on income; Black workers have historically earned less. A greater number of Black Americans are retiring with a lower level of benefits.

A Lack of Legacy Planning and Generational Wealth

Black people historically, do not have generational wealth that could be passed down and built upon. Having an estate plan is the key. It’s important to make sure we’ve got wills and trusts. It’s also important to make sure our assets are titled properly, without going through probate. So many Black people don’t have life insurance, let alone, a will.

The key block to retirement security for Black people is the denial and deprivation of asset accumulation for previous generations. For workers securing their retirement now, despite the obstacles, there are other ways to finish strong. Stay tuned for part two, where I will be discussing other ways to finish strong and retiring in the “black!”