RETIREMENT INSECURITY IN BLACK & LATINO COMMUNITIES
By Gillian K. Mullings
Insurance and Retirement Planning Advisor
The topics of income gaps, gender wage gaps, and wealth gaps are common and recurring themes in many conversations today. There are many examples of these phenomena when you look at CEO compensation compared to rank and file workers; or the incomes of men versus women for doing the same jobs; and the level of financial security and wealth accumulation among Whites versus every other racial / ethnic group and demographic in the U.S. today. The most significant factor that accounts for this dramatic difference in wealth accumulation and net worth is inter-generational wealth; assets and property passed from one generation to another. Whatever the specific theories or causes for the stark differences in income and wealth accumulation may be, Blacks and Latinos are consistently at the bottom of every list.
According to a report in the 2010 U.S. Census Bureau’s Survey of Business Owners, from 2002 to 2007, the number of black-owned businesses increased by 60.5% to 1.9 million, more than triple the national rate of 18.0% for all other groups. Revenue generated by black-owned businesses increased 55.1% to $137.5 billion.Yet, our communities were hit harder and have taken much longer to recover from the Great Recession.
It is fair to say that for the last few years, the U.S. has been experiencing an economic recovery. Yet the wealth gap has actually grown during the economic recovery, with the wealth of White households now at 13 times that of Blacks and 10 times that of Latino households by some estimates. It would also be fair to say that whether we’re in boom times or bust, Blacks and Latinos just aren’t saving or retaining valuable assets to pass on as well our counterparts do in other demographics. Often, it is because large segments of our communities work for employers who don’t offer 401K plans. We are also less likely to have dedicated retirement savings, IRAs, or even an emergency fund to cover 3 months living expenses. We are also less likely to take advantage of expert financial advice regarding money management and wealth building strategies.
Our last resort, then, is to make the most of the dollars and opportunities that we DO have. The Social Security System is set up to benefit tax-paying American workers, their dependents, spouses, ex-spouses and widows. Social Security Retirement Income is an important safety net, especially for African-Americans without additional savings, for whom Social Security Retirement Income represents 90% of their total income in old age. However, there are still ways that we have been short-changing our own futures by working off the books and not paying into FICA, or by under-reporting self-employment income. Data at www.SSA.gov shows that in 2013 the average yearly Social Security income for African American men 65 years and older was only $14,800, compared to $12,540 for African American women.
The problem is not in our efforts; our efforts have created a small business economic force of well over $137.5 Billion dollars. The problem is in our poor saving habits and lack of planning. In my role as a Financial Representative, more than anything else, I encourage my clients to become aggressive savers. Your goal should be to save 10-15% of your take home pay, in addition to any pre-tax payroll contributions to a retirement account. If you can’t save 10%, save 5%. And if you can’t save 5%, save 2%. Something is better than nothing.
Money Talk Dollars and Sense do not give tax, accounting or legal advice. You should consult your tax, accounting or legal advisor regarding your individual situation.