LGBTQ Americans less confident about retirement

Pride Month celebrates the strides that the LGBTQ community has made toward equality. However, a new survey found that many in the community still lags the general population in confidence about retirement.

“The bad news is that retirement savings may not be as high of a priority relative to other financial needs in the moment,” according to Lisa Greenwald, CEO of Greenwald Research. “LGBTQ respondents are less likely to report having ever saved for retirement. This obviously rises with income, but within each income category, LGBTQ respondents were less likely to say they had ever saved.”

Greenwald was part of a June 14 online discussion of Focus on LGBTQ Americans – Results from the 2022 Retirement Confidence Survey, sponsored by the Employee Benefit Research Institute. The survey included an oversample of LGBTQ workers and retirees to better understand differences and similarities with respect to retirement-related behaviors and attitudes.

Roughly 10% of Americans identify as LGBTQ, said Craig Copeland, director of Wealth Benefits Research for EBRI. Members of this community are:

• More likely to have lower incomes,
• More likely to be younger,
• More likely to be employed and not retired,
• Less likely to be married,
• More likely to be living with an unmarried partner and
• More likely to say they have fair or poor health as opposed to very good or excellent health.

Fewer assets and higher debt likely contribute to lower retirement confidence.

“Even when we control for income, non-LGBTQ Americans are more likely to have assets outside of a home of $250,000 or more than LGBTQ community members,” Copeland said. “There clearly are more assets in the non-LGBTQ community than the LGBTQ community. The LGBTQ community also is more likely to have a major or minor problem with debt, while non-LBGTQ community members are more likely to say debt is not a problem.”

This lack of confidence is consistent across various income levels.

“Retirement confidence goes up with income,” he said. “The more income you have, the more likely you are to be confident that you and your spouse have enough money to live comfortably throughout your retirement years.

“One thing that comes out is that within each income group, LGBTQ community members are less confident. It still goes up with income, but within each income level, LGBTQ community members are less likely to be confident that they will have a sufficient amount of income to live comfortably throughout their retirement years.”

An equal percentage of LGBTQ and non-LGBTQ respondents said they said they could afford to retire sooner than planned. Their expected retirement age is identical for both groups.

“However, when we look at when they actually retired, LGBTQ community members were more likely to retire earlier than planned,” Copeland said. “They don’t expect to retire any differently, but they are more likely to retire earlier than planned. A potentially troubling finding is that the LGBTQ community is sometimes forced to retire earlier than planned because of a health problem or disability not related to COVID-19. That is significantly larger than for non-LGBTQ community members.”

Low retirement confidence is rooted in part in a lack of knowledge about how to set and attain financial objectives.

“For each workplace option, whether it was certain aspects of the target date fund or how to choose the right one, LGBTQ people are less likely to understand these investment options,” he said. “They also are less likely to say they understand environmental, social governance options.”

Many LBGTQ community members said they are not confident in their ability to select the right financial products or investments for their situation.

“As people get more income, they are more likely to be confident,” Copeland said. “However, in each income group, the non-LGBTQ community members are more likely to be confident. Not only do we have lack of understanding within the plan, but they have less confidence that they are going to be able to pick the right product.”

A lack of trust in financial advice exacerbates the problem.

‘Across all income ranges, LGBTQ respondents were more likely than non-LGBTQ respondents to feel they were not treated fairly by financial services companies and their representatives,” said Jill Jones, managing director of research for the National Endowment for Financial Education. “The magnitude of this problem is pretty similar across all income groups.”

The survey results point to an opportunity for employers and advisors to meet the needs of the LGBTQ community by understanding its needs and providing sound solutions.

“Whether its long-term goals such as retirement savings or mid-term goals such as a home purchase or a strategy for debt reduction,” Greenwald said, “unfortunately LGBTQ respondents are far more likely to agree that they do not know who to go to for good financial planning or retirement advice.”