Racial Inequities and Retirement Income: Contributing Factors and Possible Solutions

Extracted from an article by Lori Lucas and Retirement Income Institute, Alliance for Lifetime Income; link to full study is at the end of this article

Research compiled by The Alliance for Lifetime Income found that, on average, Black and Hispanic households plan less for retirement and have less accumulated savings. This disparity can lead to significant gaps in lasting retirement funds as well as the emergency savings that experts recommend. Black and Hispanic Americans are also more likely to consider debt to be a problem for their household than are White Americans across income groups.  This article extracts some key points from the comprehensive findings.

Racial disparities in retirement savings and retirement income

There is a persistent gap between White Americans’ financial means and resources and that of Black and Hispanic Americans, regardless of income level. There is also a gap in the means or resources for saving, for example, a workplace retirement plan.

The Employee Benefit Research Institute (EBRI) and Greenwald Research 2021* found that having an employer-sponsored defined contribution plan and saving in that plan are associated with higher levels of retirement confidence. However, the likelihood of having a retirement plan—either an individual account plan or a defined benefit plan, or both—was nearly twice as likely in 2019 for families with White, non-Hispanic heads as it was for families with Hispanic heads—71.7 percent versus 37.4 percent.

  • In addition to less participation in employer-sponsored plans, families with Black or Hispanic heads have less savings in individual retirement accounts and have significantly lower median account balances when they do have a plan.
  • In 2019, the median individual account plan balance of families with White, non-Hispanic heads was $80,000 versus $35,000 and $31,000 for families with Black or Hispanic heads, respectively.

Debt contributes to disparities in retirement readiness

Black and Hispanic Americans were more likely to consider debt to be a major or minor problem for their household than were White Americans, across each income group (income groups defined as less than $35,000, $35,000-$74,999 or $75,000 or more).

  • In the upper-income group, 62 percent of Black Americans and 58 percent of Hispanic Americans consider debt a problem compared with 37 percent of White Americans.
  • Non-mortgage debt was more likely to have a negative impact on saving for emergencies and for retirement in general for Black and Hispanic Americans across each income group than it was for White Americans.

Debt in retirement is growing more pronounced. Research shows that the share of American families with heads of households ages 55 or older had debt increased continuously from 1998 through 2019.

Some solutions to help meet the retirement needs of a diverse workforce

The study discusses four potential areas to focus on to support Black and Hispanic workers who are preparing for retirement.

1. Identify the sources of information that different races and ethnicities are likely to use and rely on. 

Black and Hispanic workers are more likely to use information received at work from their employer, from representatives from their workplace retirement plan provider, from libraries or community centers, and from church or religious centers or leaders.

2. Help Americans planning for retirement prioritize their retirement savings.

Hispanic Americans (regardless of income) and upper-income Black Americans were more likely than White Americans to believe it’s more important to help friends and family now than it is  to save for their own retirement. Saving for a child’s education or paying off education is also deemed more important and reduces how much can be saved for retirement.  It’s necessary to show why retirement savings should also be top of the priority list.

3. Provide increased access to financial advisers that share a connection or commonality with Black and Hispanic Americans and who they will find trustworthy.

Black and Hispanic Americans prefer some connection to those providing them with financial advice. They want to work with someone who had a similar upbringing or has similar experiences, has a similar racial/ethnic background or is the same gender.

4.  Help workers become good debt managers into retirement.

To better evaluate the financial security of all American families, we need to better understand the growing trends in debt and see what programs can be instituted to help reduce or control debt.

There are both systemic and behavioral barriers and challenges that Black and Hispanic workers and retirees face when it comes to saving for retirement. To read the entire study showing numerous charts to illustrate the findings, please go to:  https://www-1008.aig.com/annuities/sso-redirect-app/jp/pdf/M6108F53.

ALLIANCE FOR LIFETIME INCOME is a service mark of Alliance for Lifetime Income and used with permission of Alliance for Lifetime Income.

AIG is a founding member of the Board of Directors for the Alliance for Lifetime Income.

This material is general in nature, was developed for educational use only, and is not intended to provide financial, legal, fiduciary, accounting or tax advice, nor is it intended to make any recommendations. Applicable laws and regulations are complex and subject to change. Please consult with your financial professional regarding your situation. For legal, accounting or tax advice consult the appropriate professional.


*Employee Benefit Research Institute (EBRI) and Greenwald Research. 2021. “2021 Retirement Confidence Survey: A Closer Look at Black and Hispanic Americans.”
Issue Brief 530, EBRI Education and Research Fund, Employee Benefit Research Institute, Washington, DC.

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