Burdened more by debt and lacking as much wealth as their white counterparts, Black and Hispanic Americans face a tougher road to a financially secure retirement, according to a new report.
The pandemic’s sweeping job losses only made these challenges harder.
“COVID has really impacted those with lower incomes,” Craig Copeland, EBRI senior research associate and co-author of the report, told Yahoo Money. “Given that Black and Hispanics are disproportionately lower income than white Americans, it had a disproportionate impact on Black and Hispanic Americans, so that really made their situation even worse.”
For this year’s Retirement Confidence Survey, which assesses American attitudes towards retirement, the Employee Benefit Research Institute (EBRI) and Greenwald Research oversampled Black and Hispanic Americans “to allow for a closer analysis of the challenges that they face in saving and preparing for retirement,” according to the report.
What it details is how communities of color must work against systemic disadvantages when it comes to finances and retirement prospects and how COVID-19 exacerbated those challenges.
“The pandemic has brought to the fore a lot of inequality issues that existed before, but now amplify them,” Vicki Bogan, associate professor at Cornell University, told Yahoo Money, explaining how certain groups were able to withstand medical bills or job loss for the simple reason that they entered the pandemic with more money.
Take job losses. Three in 10 Americans, regardless of income, reported their households experienced a negative income or job change since February 1, 2020, the survey found. But those who identify as Black or Hispanic reported higher occurrences of these disruptions than white Americans.
That headwind added to others these Americans already face. For instance, more Black and Hispanic households across the income spectrum viewed debt as a major or minor problem impacting their ability to save for retirement versus whites. Blacks and Latinos are less likely to own or hold assets, the survey found.
This “prevailing wealth gap” impedes the ability to “build future wealth,” Copeland said.
'Certain tugs [on finances] may not exist for other groups'
Hispanic Americans, across all income levels, were more likely to prioritize helping friends and family now over saving for their own retirement as opposed to white Americans, the survey found.
The same self-sacrificing generosity is also applied to educational costs. Hispanic Americans in each income group and Black Americans in the lower- and upper-income groups were more likely to say that funding a child’s education was taking away from funding their retirements than white Americans.
It’s also possible that money goes to relatives outside of the home or even outside the country, said Mandi Woodruff-Santos, a career and wealth-building expert and a co-host of the Brown Ambition podcast.
“Certain tugs [on finances] may not exist for other groups,” she said.
It’s not just culture that drives that assistance, Dr. Bogan pointed.
“Let's think about why they have to take care of their parents — it's because of a lack of wealth,” she said. “A lot of it has to do with the huge wealth gap in race.”
'You really have to bare your financial soul'
Many Black and Brown Americans also distrust financial institutions after decades of discrimination in lending and banking. That makes it harder for these Americans to seek out financial assistance to plan for their futures, especially from a professional who often has a different life story or experience than theirs.
“There isn't a large population of Black and Hispanic people being financial advisors, but that's something they're looking for," Copeland said, "to feel more comfortable, to have people that can understand the situations that they go through.”
Woodruff describes it as an issue of trust that can initially be bridged with commonalities. There’s great value placed on having someone who understands cultural or inherited beliefs because they come from a similar background.
“You really have to bare your financial soul and that can be harder to do when you feel like you're talking to a stranger,” Woodruff said.
'White people might retire early because they can'
Nearly half of retirees reported retiring earlier than expected, according to the survey, but the reasons differed sharply between Black and Hispanic Americans and whites.
Both Black and Latinos were more likely to say they had to retire earlier due to health reasons and disabilities, whereas white Americans said they retired because they could afford it, the survey showed.
“In this country, you're just more likely to be unhealthy if you're not white,” Woodruff-Santos said. “White people might retire early because they can, because they want to. If you're Black, [retirement] is more likely to be because you have a disability, or you were just too unhealthy to keep working.”