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Exploring Diverse Paths to Retirement

How different races and ethnicities approach saving for the future

By Olga Lucia Torres

My immigrant Latino parents never spoke to me about money. Their emphasis was always on education. I had to go to college, end of discussion. But when I got to college, I knew nothing about savings accounts or high-interest-rate credit cards or how debt can ruin your life.

A couple making financial plans for retirement. Next Avenue
Studies and experts concur that financial literacy can empower individuals from all backgrounds to make informed decisions about retirement savings.  |  Credit: Getty

I'm in my early 50s and have only recently paid off my decades of accumulated debt and started saving for retirement.

We need to learn about money and what to do with it, but the purveyors of such wisdom are a rare commodity in Black, indigenous, people of color (BIPOC) communities. Information about saving, investing and retirement needs to be passed down from generation to generation, according to Mark Willis, a retired Morgan Stanley financial executive.

Why Knowledge Is Essential

"If you don't have that resource of historical knowledge within the financial markets, you're prone to operate on whatever information you hear on the media outlets you use," he says.

"If you don't know what you don't know, then you don't even know what to ask."

One-third of Black investors said they invested in something based on information they saw on social media, compared with 20% of white investors. According to the FTC, financial scams, including cryptocurrency schemes, cost consumers $3.8 billion last year just in the U.S., twice as much as in 2021.

Dr. Troy Callahan, a Black plastic surgeon and experienced investor, says that a lack of knowledge about financial matters contributes to the mushrooming growth in financial fraud.

"If you don't know what you don't know, then you don't even know what to ask," says Callahan, who is Chief of Plastic Surgery at Englewood Health, a teaching hospital in Englewood, New Jersey, and owner of Northern Jersey Plastic Surgery Center.

The Investment Gap

A lack of information may help explain the investment gap between Black and white investors. In 2022, 58% of Black Americans owned stocks, compared with 63% of white Americans, according to the 2022 Ariel-Schwab Black Investor Survey. Two decades earlier, a much larger percentage of Black Americans — 74% — owned stock. The peak for white investors was 86%, in 2002.

The question becomes, can people of color keep up their standard of living when they retire?

The U.S. Federal Reserve's latest Survey on Consumer Finances showed that 57% of white families had savings in retirement accounts, compared with only 35% of Black families and 26% of Latino families.

Many Employers Offer No Plan

The problem is magnified when you factor in who has access to retirement plans. In July 2022, the AARP Public Policy Institute found that 64% of Latino workers, 53% of Black workers, and 45% of Asian American workers lack access to an employer-provided retirement plan. That compares with just 42% of white workers.

"Growing up in the projects, there wasn't anyone really saving or investing for retirement."

"Growing up in the projects, there wasn't anyone really saving or investing for retirement," says Joanne Garce-Rodriguez, director of diversity initiatives at New York University. "It was really just surviving the month with the income you would receive either through low-wage work or public assistance. If you did have a job with a pension, that was retirement for those few. Everyone else just expected Social Security."

The reliance on Social Security and other government programs for retirement income can differ among races and ethnicities. Historically marginalized communities may depend more on these programs due to limited employer-sponsored retirement plans and/or personal savings access.

Overreliance on Social Security

According to the National Academy for Social Insurance, Social Security is the sole source of income for 40% of Latinos aged 65 and over, 33% of Black Americans in that age group and 26% of Asian and Pacific Islanders; it is the sole income source for only 18% of whites.

"Race and ethnicity impact everything, just how you're raised and treated in society."

Understanding the impact these programs have on retirement security is essential in addressing disparities.

Callahan says that having parents who were not financially savvy affected him.

"Race and ethnicity impact everything, just how you're raised and treated in society," he says. "Because even as a physician with higher education, we're not taught investment or business anything. We're taught how to care for patients, but we're really poor businesspeople."

The bottom line is that access to financial resources and wealth disparities are critical factors contributing to inequalities in retirement savings across races and ethnicities. Historical and systemic factors — such as limited access to high-paying jobs, educational opportunities and home ownership — have led to wealth gaps.

Financial Literacy Is Key

Studies and experts concur that financial literacy can bridge this gap, empowering individuals from all backgrounds to make informed decisions about retirement savings. Becoming financially confident and lifelong savers and investors helps create good habits that will follow people into retirement. It also helps investors discern between reliable online sources of information to make wise investment decisions.

"Many new and younger investors have never experienced market volatility as we've seen in the last couple years," says Mellody Hobson, the co-CEO and president of Ariel Investments. "We have a responsibility to educate these new investors about the value of long-term investing to build wealth and achieve financial security."


Judi Rosenthal, a financial advisor at Bernstein Private Wealth Management, also advocates the importance of being transparent with clients, "telling them how it all works . . . what they own, what they're buying and selling."

Cautious, for Good Reason

Trust also plays a major factor. Black Americans are less trusting of the stock market (30% vs. 23%) and financial institutions (28% vs.18%) than white Americans, according to the Ariel-Schwab survey. This has led many Black investors to pull out of the market. Since 2020, the two main reasons Black Americans have given for not investing were lack of trust and bad investing experience.

"I am super cautious and risk averse because I don't have a 'trust fund' or 'generational wealth' to fall back on."

A Black attorney, Kevonne Small, the acting chief of staff of the Office of Justice Programs in the U.S. Department of Justice, finds that her life experiences have made her heedful.

"I am super cautious and risk averse because I don't have a 'trust fund' or 'generational wealth' to fall back on," she says. "My investing decisions are based on my need to be financially safe. Notably, my investing decisions are tied to my career choice, which was to select a very stable, risk-averse job with the federal government."

This is also true among Latinos. Garce's mother and my mother each bought and rented a single-family home. They saw real estate as a more trustworthy investment than the stock market.

So, how do you get past the fear of the market and investing?

Start by Talking Frankly

It can start with open and honest conversations at home, being transparent with your loved ones about what you know — and don't know.

Emily Kuvin, a lawyer and journalist turned jewelry designer, told her children to max out contributions in their 401(k) plans, starting with their first jobs. Garce and her husband, Danilo, split their pre-teen children's allowance into spending, saving and donating. As parents, it's important to lead by example. Explaining how you must plan for retirement is a lesson few people learn early in life.

I'm hopeful. My teenage daughter thrift shops on the day of the week students get a discount, and my husband and I got her a Greenlight Debit Card so she can learn how to spend, save and invest consciously. You can do the same.

Olga Lucia Torres
Olga Lucia Torres is a former public defender who teaches narrative medicine at Columbia University. She also works as a patient advocate and has volunteer leadership roles within various foundations that seek to help and empower patients. Olga has been published in the New York Times, Popsugar, the New York Daily News, and various other publications on disability rights, healthcare and Latino issues. Read More
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