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The Retirement Crisis Facing Blacks and Latinos

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

By Nari Rhee | February 21, 2013
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Nari Rhee, Ph.D., is manager of research at the National Institute on Retirement. She was formerly an associate academic specialist at the University of California Berkeley Center for Labor Research and Education.

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 analysis of Census Bureau data.
 
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 age 65 and older (the average retirement income for that group: less than $6,000), compared with 1 of 5 whites.

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Poverty statistics put this inequity into even starker relief: Blacks and Latinos who are 65 or older are more than two and a half times 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 77 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, according to AARP.

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). 
 
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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 income for 33 percent of older black families and 36 percent of older Latino families. Just 26 percent of older white families 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 the government made it easier for workers to save and invest for retirement. 
 
One way would be to make it easier for large companies to offer pensions. Momentum is also gathering behind the idea of states or the federal government sponsoring a high-quality, low-cost, professionally managed, portable retirement savings plan for private-sector workers who don't have access to retirement plans through their employers. Workers would voluntarily contribute a small percentage of their earnings to these plans through automatic payroll deductions.   
 
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California recently passed a bill moving toward the creation of such a program, the California Secure Choice Retirement Savings Trust. And policymakers in states like Connecticut, New York and Wisconsin are considering similar proposals. Sen. Tom Harkin (D-Iowa) is about to introduce a bill for a universal retirement savings program in Congress. 

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.
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