The Retirement Crisis Facing Blacks and Latinos

Next Avenue

Why so many people of color retire poor — and what can be done about it

Most middle-aged Americans aren’t in a position to retire with enough income to maintain their standard of living, according to recent studies. But a comfortable retirement is even more elusive for many blacks and Latinos, according to my recent analysis for the Center for Labor Research and Education at the University of California, Berkeley.

For one thing, today’s retirees of color are much more likely to have a low income than white retirees. One of 3 blacks and 1 of 2 Latinos fall in the lowest income group among retirees (the average retirement income for that group: $7,081), compared with 1 of 5 whites.

Poverty statistics put this inequality into even starker relief: Blacks and Latinos who are 65 or older are twice as likely as whites to live in poverty.

Chief Causes of Retirement Insecurity

It’s clear that the disadvantages that many people of color face — in access to a decent education, wages and jobs — can ultimately lead to retirement insecurity.

Take a look at the differences between blacks and Latinos and whites when it comes to receiving Social Security benefits: Just 84 percent of blacks 65 or older and 78 percent of Latinos live in families receiving Social Security benefits, compared with 91 percent of whites. And blacks and Latinos’ average monthly benefits are about a quarter less.

This is because Social Security benefits are tied to lifetime reported earnings, and workers of color are, in general, disadvantaged through low-wage jobs, a higher incidence of disability, higher unemployment (for blacks) and immigration status (for Latinos).

The story isn’t much better when it comes to pensions or retirement accounts. While 54 percent of employed whites work for employers that provide retirement plans, only 45 percent of blacks and 30 percent of Latinos do.

Because their retirement income from pensions and retirement accounts is so meager as a whole, blacks and Latinos rely more heavily on Social Security in retirement than whites. Social Security accounts for at least 90 percent of the retirement income for more than 30 percent of older black households and 26 percent of older Latino households. Just 22 percent of older white households rely on Social Security for at least 90 percent of their retirement income.

Possible Solutions

What can be done to ensure that more black and Latino workers are able to retire with enough income for a comfortable and dignified retirement?

Social Security would have to be strengthened, not cut. While the program is critical to all working Americans regardless of race, it has special urgency for people of color because they have less access to other sources of retirement income.

It would also help if states or the federal government sponsored a high-quality, low-cost, portable retirement savings plan for private-sector workers who don’t have access to retirement plans through their employers. Workers could contribute a small percentage of their earnings to these plans through automatic payroll deductions. Policymakers in several states — including California, New York and Florida — are considering this idea.

Many experts maintain that the ideal model for retirement plans should include coverage for all workers and the ability to take your retirement benefits with you when you leave a job, with funding responsibility split between workers and employers.

These policy measures would significantly improve the retirement prospects of millions of workers of color who currently face serious hardship in old age.

Data sources and notes: Except where noted, figures are from my analysis of the U.S. Bureau of Labor Statistics and U.S. Census Bureau’s Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC), March 2012, data for calendar year 2011. “Retirees” are individuals age 65 and older who did not work during the reference year. Older individuals in general are age 65 and older. Families consist of related individuals in the same household and single individuals not living with a relative. The race of families was determined according to the race of the head of household or the first person listed in the family in the CPS survey data.