Kimberly Owens doesn’t know if retirement will ever be a
reality for her. A well-educated project coordinator in her late 40s, she has
pulled from her retirement funds for emergencies twice in 20 years. Her 401(k)
balance is in the low-five figures.
“I’m going to be working until I am 75 at this rate,” said
Ms. Owens, who works for the New Haven, Conn., campus of a medical-device
company. “I’m not anywhere close to where I thought I was going to be at this
point in my life.”
Many American households aren’t prepared for retirement, but
Black Americans like Ms. Owens are even further behind than whites, according
to academic and government data. The recent economic turmoil is likely widening
Many Black Americans are hampered in saving for retirement
by such factors as less intergenerational wealth, more college debt, lower
incomes and lower homeownership rates than white Americans, according to
academic and government data.
Even before the pandemic hammered the economy, Black families
on average had roughly one-sixth the savings set aside for retirement compared
with white families, according to an analysis of government data by the Urban
Institute think tank. That is $25,000 in retirement savings accounts for Black
households as of 2016 versus $158,000 for white households. Hispanic households
fared only slightly better than Black ones at $29,000
“There is no silver bullet to correct the inequities that
are 400 years in the making and deeply ingrained in our systems, institutions,
and laws,” Richard Neal (D., Mass.), chairman of the House Ways and Means
Committee, wrote in a recent report on health and economic equity.
Black families often have less cushion in their paychecks to
draw on in case of emergencies and are more likely to pull from retirement
accounts when a problem arises. White households earned a median income of
$69,823 in 2019 versus $43,862 for Black households, census data shows.
Ms. Owens liquidated two 401(k) accounts in the early 2000s
when she was laid off and when an expected raise fell through. Her 3%
contributions to her retirement account, matched by her company, aren’t enough
to help her catch up on her savings.
A 2019 Government Accountability Office report estimated
that 10% of Black retirement-plan participants took hardship withdrawals from
plans in 2013, for reasons including buying a home and preventing foreclosure.
That compared with 3% for white participants.
For Ms. Owens, who is single, emergency savings have been
difficult to build. She spent 10 years attending college and graduate school
while working full time to defray the costs. With a degree in business
administration from Albertus Magnus College and a graduate degree in the same
field from the University of New Haven, she thought she was on her way to a
Ms. Owens’ administrative positions over the years haven’t
paid enough to cover more than the minimum student-loan payment on an
income-driven repayment plan, she said. She currently pays about $200 a month
toward her loans, but her initial student loans of $80,000 have ballooned with
interest to six figures. “It’s a losing game,” she said.
Twelve years after starting college, Black college graduates
on average hold more than three times as much student-loan debt as their white
counterparts, according to a 2018 report from the Brookings Institution, a
Another big barrier to saving in a 401(k) is that many
Americans don’t have access to one. Among white private-sector workers, almost
60% have a retirement plan at work versus 50% of Black workers, according to
Outside of retirement accounts, homeownership offers another
potential source of lifetime savings to Americans. But the average Black
household has $4,400 in home equity, compared with $67,800 for white households,
according to Boston College’s Center for Retirement Research.
The gap in homeownership rates in 2019 between Black and
white households—about 41% for Black Americans versus 73% for whites—was the
widest in a quarter-century, according to census data.
The foreclosure crisis of more than a decade ago hit Black
households harder than white ones in part because Black families had fewer
assets to borrow against or sell. With more resources, white families “were
less likely to lose their homes than Black families and it was easier for them
to get back on track,” said Kristen Broady, policy director for the Hamilton
Project at the Brookings Institution.
The decline in homeownership rates “is going to have a very
harmful effect on the extent to which minorities can accumulate wealth for
retirement,” said Alicia Munnell, director of the Boston College retirement
Research by Brookings senior fellow Andre Perry found that
houses in majority-Black neighborhoods are also valued lower than similar houses
in neighborhoods with few or no Black residents, after controlling for such
things as crime rates. These lower valuations can lead to lower wealth for
Black families as well as less property-tax funding for neighborhood
infrastructure and schools.
The median black household holds a fraction, about
one-eighth, of the net worth of white households, a measure of total assets
such as all investments including those in retirement accounts, home equity,
and life insurance, minus liabilities including debt, according to the Bureau
of Labor Statistics. The gap has grown more than 50% in the past 30 years, and
is likely wider now given that Black workers have been disproportionately
affected by layoffs during the pandemic, said Dr. Broady. Black Americans are more
likely than whites to work in jobs that cannot be done remotely, making them
more vulnerable to layoffs during shutdowns.
Along with vulnerability to layoffs, lower wealth and median
incomes are among the reasons Black workers are more likely than white ones to
face situations where money that might otherwise be set aside in savings is
used to help alleviate immediate family hardships.
Marty Cho, 36, has been working as a nurse practitioner at
Stanford Health Care since July after graduating from Simmons University in
Boston in 2019. A Daly City, Calif.-resident, Mr. Cho has paid off about half
of his higher-education costs and contributes 6% of his salary to his 401(k).
He wishes he could pay off his loans faster.
He and his wife, an engineer, often help his brothers and
cousins buy school books and pay job-training fees, among other expenses. He
says this isn’t something his white peers understand.
“When I tell them I have to give my siblings money or I have
to support my family, it’s always met with a very confused look,” he said.
A study published in 2017 by the Institute on Assets and
Social Policy at Brandeis University found that 45% of Black college-educated
households gave financial support to the parents of at least one adult in the
household, compared with only 16% of white college-educated households.
“There is this additional tax that our peers don’t have to
pay because there isn’t this expectation to pull everybody up,” said Tremaine
Wills, a financial planner in Hampton Roads, Va.
Calvin Bunch Jr., a 46-year-old nuclear engineering
technician for the federal government, said he was finally able to pay off his
student loans from his undergraduate degree at Christopher Newport University
in Newport News, Va., about 10 years ago by refinancing his family’s home. Less
than a decade later, he was contributing to his daughter’s college and
graduate-school tuition, helping her graduate with less than $20,000 in debt
and start her career as a social worker making a robust 401(k) contribution.
“I didn’t want her to be in the same situation that my wife
and I were,” Mr. Bunch said.
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