A collage of a woman of color in a dress, money and a personal 401k statement.

Women's Work

The Retirement Crisis for Women of Color

There’s long been a gender disparity for women in retirement. But for women of color, racial inequities that prevent them from building and sustaining wealth cripple their financial security.

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Tijanna O. Eaton, a senior information specialist at Genentech, turned 56 on December 10, 2020. She wants to retire by the time she’s 59-1/2, a goal which she admits defies conventional wisdom, because she wants to savor the fruits of her labor before she’s too old.

“I don’t want to wait till I’m 65 or 70 or 75,” Eaton says. “I think that this whole retire as late as you can thing—it’s a scam because, especially for Black people in America, we’re not guaranteed to make it to retirement.”

Eaton envisions spending her retirement doing many things: writing a book about her sobriety journey, expanding her home, working to advance the Black Lives Movement, “laying around in pleasure,” making music. Though some workers like Eaton are able to foresee a leisurely, financially stable retirement where they can relax and fulfill personal goals, many women, and particularly women of color, are unable to have a secure retirement due to the systemic inequalities they face. Gender disparities throughout their careers lead women to receive Social Security benefits that are, on average, 80 percent of what men receive, according to the Brookings Institution. Add in racial inequality—census data shows that Black women make 61 cents on the dollar compared to their white male colleagues—and women of color have even less of a liveable income to save for retirement. On top of that, many women of color work in industries that don’t provide them with employer-based savings plans or enough pay to save and build wealth through homeownership. And if the federal government doesn’t address those inequities, make Social Security solvent, or alleviate other expenses that deter funds from retirement savings like childcare or student loan debt, many women of color still won’t be able to pull together the resources they need to retire comfortably, if at all.

In fact, women of color are more likely to fall into poverty in retirement because they are less likely than white women to have retirement plans available through their employer, says Geoffrey Sanzenbacher, an associate professor at Boston College and research fellow at the Center for Retirement Research. It’s rare for workers to be able to save substantial amounts of money for retirement outside of those plans, creating inequality in who can save for the future, Sanzenbacher says. A 2020 Pew Research report found that while more than half of Americans (52%) have some investments in the stock market through retirement accounts, just 31% of non-Latinx Black and 28% of Latinx households own some stocks, compared to the 61% non-Latinx white households.

Eaton will retire with subsidized health care and other perks from her employer, a 401(k), and owns her home. But even with all these factors in mind, Eaton, a Black queer woman who’s polyamorous, says her retirement savings journey differs from that of her heterosexual white and fellow LGBTQ peers. She recalls sitting in a meeting at work to discuss retirement benefits alongside her white women colleagues who were in heterosexual marriages. It occurred to her that her peers didn’t appear to be worried about their retirement futures, she says. On the other hand, in her conversations with fellow older queer people of color who are financially insecure, they discuss creating compounds or some sort of shared economic arrangement to support one another as they age, Eaton says.

Sanzenbacher notes that much of the wage gap stems from income inequality that Black and Latina workers face over the course of their working lives. The Federal Reserve’s 2020 report on racial wealth disparities indicated that the median wealth for Black Americans is $24,100, compared to $36,000 for Latinx Americans and $142,000 for white Americans. Other groups, including Asian, American Indian, Alaska Native, Native Hawaiian, Pacific Islander, and multiracial people, have less wealth than white Americans but higher wealth than Black and Latinx families, the report notes. On top of earning less than their co-workers, it’s difficult to set aside funds for retirement when you’re not earning enough to meet your daily needs.

“The idea that you’re going to make $7 an hour and then somebody’s gonna give you a retirement plan with a match—it’s just not gonna happen,” says C. Nicole Mason, Ph.D, president and CEO of the Institute for Women’s Policy Research. “People are really, very preoccupied with the basics, so planning for retirement is not on the table.”

The wealth gap persists even for those who are able to save. A report from the Center for Retirement Research found that white retirees had 7.3 times more wealth than Black retirees and 5.1 times more than Latinx retirees in 2016. Sanzenbacher acknowledged that while Asian Americans certainly face discrimination, Asian Americans tend to look more like white Americans in wealth accumulation.

Furthermore, women of color are overrepresented in industries like hospitality, education, and lower-wage health care jobs, says Mason. These workers are thus not able to set aside any money at all for retirement nor have an employer contribute to their retirement nest egg. With the COVID-19 pandemic leaving many women out of work, they may make less once they re-enter the workforce than they had before the coronavirus-induced recession, which directly impacts their long-term economic security—particularly women in the service sector, she says.

In economic downturns, generational wealth and savings provide a cushion even if you lose your job. As the New York Times reports, some Americans with access to retirement accounts have tapped into those savings to cope with the financial impact of the pandemic. But for most women of color, they don’t have assets to draw from, and neither do many of their family members, Mason says.

“It is really two different Americas when we talk about income security, wealth, and assets,” Mason says.

Looking back on the 2008 recession, the foreclosure wave disproportionately affected people of color broadly but women of color specifically, Mason says. And the economic blow of it forced women out of the workforce for a long period or pushed them out of the labor market entirely, which affects their ability to hold onto their assets. For many women, their biggest asset is their home, she says.

Eaton and a co-worker both bought their homes about five years ago. She didn’t receive help from her family to buy the property; her colleague, however, mentioned that his parents paid the down payment for his home, she explains. Given that she has to be solely responsible for her finances, she says she feels the need to be more careful with her spending.

“I do have to be more financially conservative than I want to be, and it has served me well. And I wish I didn’t have to think about that all the time,” Eaton says.

Both Mason and Sanzenbacher pointed to homeownership rate disparities as drivers of racial wealth disparities. Per 2020 census data, 46.4% for Black households owned their homes, compared to 75.8% of non-Latinx white households and 61% of Asian, Native Hawaiian, and Pacific Islanders.

Homeownership is one of the primary ways that people of color can build wealth, but bad lending practices and redlining continue to occur in the U.S., which curtails people of color’s ability to build generational wealth, Mason says. Even for homeowners in Black neighborhoods, in particular, homes in Black communities are devalued, she says. Sanzenbacher notes that homeownership allows retirees to avoid paying rent, but that opportunity isn’t as available to Black and Latinx households as it is for white households.

Other ancillary costs, such as childcare or student loan debt, also divert income away from saving for a home, Mason says, adding that childcare costs can make up a significant portion of one’s income . A Center for American Progress analysis of U.S. Census Bureau data found that families within less than 200% of the federal poverty level spend 35% of their income on childcare.

Black women have the highest mean of student loan debt at $37,558, compared to $31,346 for white women, $27,029 for Latinas and $25,252 Asian women, per a 2020 report from the American Association of University Women. It’s unclear whether President-elect Joe Biden will cancel student loan debt.

To prevent women of color from falling into retirement poverty, Mason and Sanzenbacher both point to Social Security solvency as a vital public program for preventing retirement poverty, in addition to federal programs that would address housing discrimination, student loan debt, and childcare costs. Even though Black women and Latinas may earn less in their jobs, social security is a progressive benefit that helps to lessen the retirement savings inequality between them and their peers, Sanzenbacher says. Despite this, elected officials periodically propose gutting Social Security benefits, but it’s critical that to keep this program intact so that future generations can access it, she says.

“If nothing is done about [Social Security insolvency] in 10 years, benefits are going to be cut by 20% to 25%, and that’s going to hurt women of color,” Sanzenbacher says.

Lawmakers have also proposed creating “auto-IRA” initiatives to create retirement savings accounts for workers who don’t have access to such accounts through their employer, Sanzenbacher says. Some states, such as Oregon, Illinois, and California, facilitate retirement savings for workers, but there’s a lack of political will to do so at the federal level, he adds. Mason cites the undermining of worker organizing as well as a shifting economy as reasons why corporations and some state governments have moved away from pension plans for workers. Workers are no longer working at the same company for decades, so some proposed portable benefits that follow workers wherever they go, Mason says.

Though addressing retirement inequities for women of color will take time, Mason says the recent appointments made by Biden are a good sign, particularly the appointment of Cecilia Elena Rouse to serve as chair of the Council of Economic Advisers. Mason anticipates that whomever is appointed to serve as the Secretary of Labor under the Biden administration will understand the needs of workers.

In a perfect world, Eaton would like to see direct payments or completely subsidized homes for Black people. People of color, but especially Black and Indigenous people, need financial reparations for the atrocities they’ve faced in the U.S., she says.

“Black people in the United States should literally never have to pay for anything ever again,” Eaton says. “But in the absence of that, I think there should be retirement for Black people, Black women, Black queers, whomever Black.”

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