Racial Wealth Gap Deepens U.S. Retirement Crisis
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What is the main topic discussed in this episode?
Here's your Money Briefing for Monday, February 22nd. I'm J.R. Whelan for The Wall Street Journal. On Friday, we discussed new rules that protect 401k account holders who want to roll their savings over into an IRA. Today, we look at the broader retirement crisis of Americans not saving up enough to live comfortably after they retire. Government and academic data shows that is especially true among Black Americans.
So data shows that over, you know, just in a normal course of events that among people who have 401ks who are black, they're more likely to take money out of those 401ks before retirement. So whether it's through the hardship withdrawals or whether it's through cashing out of 401k plans when people leave jobs, that happens quite a bit.
That's our retirement reporter, Ann Tergesen. Coming up, she'll tell us what some states are doing to boost retirement savings and close the wealth gap.
How big is the retirement savings gap between Black and white families?
And we'll speak with a financial planner who works with Black clients about some of the challenges they face. That's after the break.
The looming retirement crisis in America has left many households ill-prepared for their later years. But the data indicates that Black Americans are significantly further behind than their white counterparts. In a moment, we'll speak with a financial planner about how her Black clientele is coping. But first, let's bring in our retirement reporter, Ann Tergesen. She's covered the retirement picture extensively for The Wall Street Journal. She's been looking into this particular issue, and she joins me now. Ann, thank you for taking the time to be with us.
You're welcome.
So can you give us a sense of how big a disparity we're talking about? How wide a gap is there in average retirement savings between white and black families?
It's substantial. According to some estimates by the Urban Institute, black families on average have about one-sixth the amount set aside for retirement that white families do.
How much do home equity and homeownership contribute to the racial wealth gap?
So the average account balance being about $25,000 for black households versus almost $160,000 for white households.
Now, how much does savings outside of retirement holdings play a role in this disparity?
So two big ways that people generally save for retirement now is either through a 401k or IRA, so some type of retirement savings account, or secondly through your home equity. So that's another way that people, you know, they purchase a home and over time they pay off their mortgage and they build home equity. And then in retirement, oftentimes people will sell their home and they'll downsize to a rental or something less expensive, and they'll have a lot of home equity that they can monetize and they can use to supplement their social security. But here again, there's a huge disparity in terms of the home ownership rates. We're at a 50-year high in terms of the gap between black households and white households.
Something in the low 70% of white households own their own home versus something like 42% of black households. So it's a significant gap. And then it also shows up in the home equity figures where black households have significantly less home equity in large part because they are significantly less likely to own a home.
And that adds up. Government data shows that the gap in net worth between black and white families has grown more than 50 percent in the past 30 years. Here to discuss further what this means for black families is Tremaine Wills. She's a financial planner from the Hampton Roads area of Virginia who works with black individuals and families. Tremaine, thank you for coming on the show.
Who is Tremaine Wills and what clients does she serve?
Thank you so much for having me.
So tell me about the people and the families that are on your client list.
I primarily serve black women entrepreneurs. Many of them are single, younger individuals who are just getting started on their journey. I also have a couple clients that are in their 40s who are young families as clients as well.
What are the biggest factors that stand in the way of many of your clients being able to either start the saving process or save over time for retirement?
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:57
2
How big is the retirement savings gap between Black and white families?
0:57–1:55
3
How much do home equity and homeownership contribute to the racial wealth gap?
1:55–3:35
4
Who is Tremaine Wills and what clients does she serve?
3:35–5:18
5
What income and education barriers prevent Black clients from saving for retirement?
5:18–9:15
6
How does job type and employer benefits limit access to 401(k)s for Black workers?
9:15–11:43
7
What is the 'Black tax' and how does family financial responsibility affect retirement savings?
11:43–11:59
Speakers
3 identifiedMore from WSJ Your Money Briefing
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