Retirement Savings by Race

Wide disparities exist between White and non-White future retirees—a “racial retirement wealth gap”

Reviewed by Margaret JamesReviewed by Margaret James

Studies of how much Americans have saved for retirement show wide disparities among different racial and ethnic groups. This article looks at retirement savings by race and explores the reasons for what many call a “racial retirement wealth gap.”

Key Takeaways

• On average, people of color in the U.S. have less money saved for retirement than their White counterparts.
• More than half of Black and Latinx households have no retirement savings, while only a third of White households lack savings.
• Racial wage gaps are a major reason that Black and Latinx workers are unable to save as much for retirement.
• Black and Latinx workers are also less likely to work for employers who offer retirement plans like 401(k)s.
• Racial disparities in homeownership also contribute to differences in wealth building and retirement savings.

What Is the Racial Retirement Wealth Gap?

Racial minorities in the U.S. have less money saved for retirement than White Americans, putting them at an increased risk of financial insecurity in their post-work years.

For example, the Economic Policy Institute reported that, based on 2016 data (latest information), only 41% of black families and 35% of Hispanic families had retirement account savings, compared with 68% of white, non-Hispanic families.

Not only are racial minorities less likely to have retirement accounts, but those who have accounts tend to have much lower balances than their White counterparts.

In a 2023 report, the Government Accountability Office (GAO) estimated that non-Hispanic, non-Latino Whites aged 51 to 64 had median retirement account balances of $164,361 in 2019 (adjusted in terms of 2022 dollars), compared with $80,349 for all other racial groups. In other words, twice as much.

(The GAO defines the “all other” group as “Black or African American, Hispanic or Latino, and Other Race households. Other Race households include Asians, American Indians, Alaska Natives, Native Hawaiians, Pacific Islanders, other races, and all respondents reporting more than one racial identification.”)

Origins and Causes of the Retirement Wealth Gap

Racial disparities in pay, homeownership, and the availability of employer-sponsored retirement plans all contribute to the gap in retirement savings today.

Minority group members were also disproportionately impacted by the Great Recession of 2007/2008 and the Covid pandemic that began in 2020. A Pew Research study reported that “Some 61% of Hispanic Americans and 44% of Black Americans said in April [2020] that they or someone in their household had experienced a job or wage loss due to the coronavirus outbreak, compared with 38% of white adults.”

Here is a deeper look at how disparities in wages, homeownership, and access to workplace retirement plans have created—and still perpetuate—the retirement wealth gap.

The Racial Wage Gap

While Black and Hispanic workers have experienced faster wage growth between 2019 and 2023 than before, low-wage workers still suffer from inadequate wages and middle-wage workers face inequalities across demographic groups.

A 2020 report from the U.S. Department of Labor, based on 2017-2019 data, breaks down wages by race or ethnicity as described below. This is the latest information available.

Source: Earnings Disparities by Race and Ethnicity

Lower wages not only leave workers with less available cash to save for retirement, but they also reduce their future Social Security payments, since the benefit is calculated based on workers’ wages during their careers.

For the year 2024, for example, the Social Security Administration projected median monthly benefits for beneficiaries age 60 and older as follows:

Source: Projected Profile of Beneficiaries by Race & Ethnicity

The Homeownership Gap

Owning a home has long been an important way of building wealth in the United States. It has also been a major factor in the racial wealth gap. One historical reason for the disparity has been housing and lending discrimination, particularly in the form of redlining.

While redlining is now outlawed, the differences in homeownership rates among different races and ethnic groups remain striking. In 2022 (latest information), according to the U.S. Department of the Treasury, the homeownership rate for White households was 75%.

By contrast, the rate was 45% for Black households, 48% for Hispanic households, and 57% percent for other racial groups. (In this case, the “other” category includes “Asian, Native Hawaiian or Pacific Islander, and American Indian or Alaska Native, and those who report two or more races,” the Treasury Department says.)

Home equity can be a key source of cash for retirement, especially for those with few other resources. Homeowners can sell their homes and downsize to a less expensive one once they reach retirement age. They can also take out a reverse mortgage, home equity loan, or home equity line of credit, allowing them to tap the equity in their home without having to sell it or move out.

The Retirement Plan Access Gap

While Social Security makes up a significant portion of retirement income for most Americans, that money only goes so far. Employer-based retirement plans have become increasingly important as a means of ensuring a livable post-work income, sometimes referred to as “retirement adequacy.”

Unfortunately, studies have found substantial disparities in access to retirement plans along racial and ethnic lines. A 2022 report from the AARP Public Policy Institute found that nearly half of American workers (47%) don’t have an employer-sponsored retirement plan, with minority group members faring the worst:

Source: AARP

Employer-sponsored retirement plans make saving for retirement much easier than saving on one’s own. Defined-contribution plans, such as 401(k)s, for example, allow employees to fund their accounts through automatic payroll deductions.

Additionally, employers often make matching contributions to these plans, sometimes matching them dollar for dollar. Employees pay no tax on that money until they withdraw it later, typically after they’ve retired.

In other words, people without these plans at work are not only missing out on the opportunity to contribute whatever they can each year but the added bonus of extra (and tax-deferred) income from their employers.

How Could the Racial Retirement Gap Be Narrowed?

Increasing the percentage of workers who have access to workplace retirement plans would be one way to help close the gap. This could be done by offering more incentives to employers for providing retirement accounts to their workers or even by creating a public option for retirement accounts. Closing the wage gap would also make it possible for workers to contribute more to their retirement plans.

Would Social Security Reform Help Close the Gap?

Statistics show that Black and Latinx retirees are more dependent on Social Security benefits than White retirees. According to the National Academy of Social Insurance, “Of those age 65 and older, Social Security is the sole source of income for 40% of Hispanics, 33% of African Americans, 26% of Asian and Pacific Islanders, 18% of Whites, and 20% of unmarried women.”

So strengthening the program and increasing benefits could have an outsized positive effect on those groups. On the other hand, “reforms” that would weaken the program or cut benefits would disproportionately harm retirees—and future retirees—of color.

What Is “Retirement Adequacy”?

“Retirement adequacy” is a term often used in academic circles. Most commonly it refers to whether a person’s retirement income will support a standard of living comparable to that of their working years. Because some expenses go down in retirement, an “adequate” retirement income is often translated as a percentage—such as 70%—of the person’s former, working income. But retirees and their income needs can vary widely.

The Bottom Line

The racial retirement wealth gap suggests that many members of non-White racial and ethnic groups may not have enough money saved for retirement when that day comes. There are a number of reasons for the disparity, with the longstanding racial wage gap being a major one.

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