Many African-Americans are facing a bleak retirement, this is a crisis that can be prevented
There’s a saying: When white America catches a cold, black America catches pneumonia. So, if there is an impending retirement crisis in America, what does that mean for African Americans? The answer to that question is discouraging.
There is a huge gap in retirement preparation of African Americans compared to white Americans, generally speaking, reporting Next Avenue. According to the Urban Institute’s Nine charts about wealth inequality in America:
The Retirement Savings Racial Disparity
The average white family had more than $130,000 in liquid retirement savings (cash in accounts such as 401(k)s, 403(b)s and IRAs) vs. $19,000 for the average African American in 2013, the most recent data available.
The wealth gap is growing. The average wealth of white families in 2013 was more than $500,000 higher than that of African American families ($95,000). In 1963, the average wealth of white families was $117,000 higher than for black families.
According to the Federal Reserve, in 2013, the median white household had $13 in net wealth for every $1 in net wealth of the median black household.
White families accumulate more wealth over their lives than African American families, on average, which widens the wealth gap as they age. In their 30s, whites have an average of $140,000 more in wealth than African Americans (three times as much). By their 60s, whites have over $1 million more in wealth than African Americans (11 times as much).
“The American dream has not happened for African Americans and Hispanics,” says Signe-Mary McKernan, economist and co-director, opportunity and ownership initiative at the Urban Institute. “Retirement wealth is at the end of the cycle. A lot of things can happen along the way before you get there.”
The pay gap and the wealth gap are among the many reasons African Americans enter retirement in poor financial shape, says Maya Rockeymoore, President of Center for Global Policy Solutions in Washington, D.C. Other explanations include financial literacy and investing habits.
The Pay Gap
“There is a pay gap when it comes to what African Americans earn when it compares to whites, even when you control for education,” says Rockeymoore. “We are starting with less.”
The hourly pay gap has widened to the worst in 40 years, according to the Economic Policy Institute (EPI) — a roughly 27 percent difference in 2015. Whites earned an average of $25.22 an hour vs. $18.49 for blacks, the EPI says. Declining unionization, the failure to raise the minimum wage and lax enforcement of anti-discrimination laws have contributed to the growing black-white wage gap, according to the EPI.
“We need to be having forums addressing labor-market decisions,” Rockeymoore says. Blacks are earning less than whites and it is not a reflection of talents or skills, she notes. “It is a reflection of discrimination in the labor market. We talk about the gender-pay gap, but we need to talk about the racial-pay gap.”
McKernan believes policymakers also need to take action to close the racial retirement security gap. “This country is built on the premise that it provides economic opportunity,” she says. “But this country continues a history of discrimination and the result of that is passed from generation to generation.”