Racial Inequities Carry Over from Work to Retirement

The Social Security Administration encourages applicants for its research grants to explore “the structural barriers that may contribute to disparate outcomes among people who have been historically underserved, marginalized, or adversely affected by persistent poverty.”

Numerous studies resulting from this research agenda reveal deep differences in how older Black and White Americans experience work and retirement. The studies have been conducted by researchers around the country, and many have been covered in this blog over the past year, which is also supported through a grant from Social Security.

Consider some studies that have relevance for a central argument made by financial advisers – that the best route to security in retirement is for older workers to delay signing up for Social Security for as long as possible to increase their monthly benefit checks. “Work longer” is the mantra for millions of Americans who haven’t saved enough to maintain their standard of living when they retire.

But three recent studies document the considerable issues forcing many Black workers into early retirement. The first is their relatively poor health. The typical 51-year-old Black woman has the health of a 69-year-old White woman according to one study. A Black man, at 51, has the body of a 64-year-old White man.

An inordinate strain is also put on Black workers by the hazardous or toxic environments many are exposed to throughout their careers. They are much more likely to hold this type of job than White workers, and the Black workers in these jobs often cite poor health as a reason they retire. They also resort to applying for federal disability benefits at more than twice the rate of older White workers. There is a financial cost in retirement to leaving the labor force early, causing a drop in income.

Social Security is the financial bedrock for most U.S. retirees. The program has particular value to Black workers because they tend to earn less. Social Security adjusts for this by providing lower-income workers with a larger percentage of their earnings when they retire than a well-paid worker will receive. Social Security holds another, less obvious value to Black retirees because there is so much unpredictability in their life spans, one study showed. For the healthiest Black retirees who do live a long time, that reliable monthly income is crucial.

But Social Security isn’t designed to provide enough income, by itself, to live comfortably. The U.S. retirement system also relies on workers to save money for old age. A longstanding problem is that Black workers’ financial wealth is a fraction of Whites’ wealth. Recent research with new information about the wealth gap finds that wealth inequality actually widens as people retire and grow old.

In the years before retirement, older White households have six times more in their 401(k)s than older Black households. That grows to ten times more after they retire. The smaller amount in savings causes an issue for Black retirees who own their homes. Although many retirees encounter difficulty paying the mortgage after their income declines, Black homeowners struggle more, according to another study.

Black workers face many inequities in the workplace, from lower pay and employer discrimination to physically demanding work that puts undue strain on their bodies. These inequities carry into retirement.

The research studies reported herein were performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium. The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA or any agency of the Federal Government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.