Race, ethnicity play huge role in retirement preparedness

How well people prepare for retirement varies substantially by race and ethnicity, which leaves some groups considerably farther behind others when it comes to retirement risk.

Overall, it’s not a pretty picture, according to a brief from the Center for Retirement Research at Boston College. Among its findings are the “enormous” earnings and wealth gaps between whites and minorities, as well as the ways in which those disparities translate into retirement preparedness.

Data on wealth and earnings, the report finds, indicate that white households now hold approximately six times as much wealth and earn almost twice as much as minority households.

And while there’s also a huge gap among groups in retirement preparedness, it’s not on the same scale as the income/wealth disparities.

In the wake of the Great Recession, the report says, half of households ages 30–59 overall are at risk of inadequate retirement income compared to 44 percent in 2007—and that’s in spite of the recovery, which has left so many people behind.

Data from the National Retirement Risk Index finds that as of 2016, even if households worked to age 65 and annuitized all their financial assets (including the receipts from reverse mortgages on their homes), half were at risk of falling short in retirement.

But it’s even worse for black and Hispanic households.

While the share of whites at risk in retirement was 48 percent, for black people it was 54 percent and for Hispanic people,  61 percent.

That’s actually smaller than the earnings/wealth disparities, the report says, but adds that the retirement gap is smaller “simply because minorities have a lower preretirement standard of living to maintain.”

From 2007–2016, it finds, retirement risk for all three groups increased—but not on an equal basis. While the gap between whites and blacks narrowed, Hispanics fell further behind. This was due to a sharp decline in earnings among low-income blacks being buffered by Social Security, as well as the bursting of the housing bubble, which hit Hispanics much harder than either whites or blacks.

Says the report, “The data suggest that the deterioration for Hispanics reflects their buying housing in the wrong places at the wrong time and that the steadiness for blacks is a function of falling earnings at the bottom of the income distribution and Social Security’s progressive benefit formula.”

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