The Racial Roots of Retirement Inequality

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Financial advisers and retirement experts say the best advice they can give workers to prepare for old age is to save, save, save.

But two young researchers might argue this advice isn’t sensitive to the hurdles that Black and Hispanic workers face when they try to save. At a recent panel discussion, the researchers presented a laundry list of the hurdles, which are harder for minority workers to clear and can be insurmountable.

One disadvantage is widely understood: people of color tend to be in lower-paying jobs overall and disproportionately work in the retail or the food service industries, which have irregular hours, high turnover, and wages that often depend on tips. Many of these jobs do not include employee health and retirement benefits, putting people of color at greater risk than White workers that their retirement income will fall short.

Dania Francis

But the roots of retirement inequality run deeper and can be seen in the racial differences in intergenerational wealth – whether homeownership or a college education that leads to a good job – said Dania Francis, an economist at the University of Massachusetts Boston and a panelist at the event hosted by the university’s Pension Action Center.

White Americans, Francis said, are in a better position to retire because they receive inheritances at dramatically higher rates than Black and Hispanic Americans. She cited Federal Reserve data from 2010 through 2019: 42 percent of White households within 10 years of retiring had already received or expected to receive an inheritance from their parents.

The inheritance numbers were 14 percent for Black and 11 percent for Hispanic households.

White parents also provide money to their young adult children at higher rates to pay for investments in their future such as college or a down payment on a house, Francis said. And, she added, the lower wages earned by workers of color will also make it harder for them to ever “bridge that gap.”

Taha Choukhmane, an assistant professor at the MIT Sloan School of Management, agreed. But he pointed to the billions of dollars in retirement incentives built into a tax code that also favors White workers and “contributes to inequality.”

Taha Choukhmane

His research shows that White workers are far more likely to contribute to an employer retirement savings plan, for which they receive tax deductions and, typically, an employer match. Even when Choukhmane compared White and Black people with the same education levels working in the same companies, the White employees saved more.

“Not only are you saving more but once you add the employer match and the tax incentive, the gap with Blacks and Hispanics is even larger thanks to these incentives,” he said.

People of color who are saving are also two times more likely to withdraw money from their retirement plans and pay the tax penalties to support others in their family or social networks who need help with expenses when they run into financial problems. “These are people with good jobs” who use their savings “to support family or help other people,” he said.

The pandemic revealed this financial reliance on family in a dramatic way. U-Mass Boston’s Francis said that lower-income Black and Hispanic workers, who were often laid off in hard-hit industries, resorted to borrowing from family and friends.

Between August 2020 and December 2021, about one in five Blacks and Hispanics borrowed money from family or friends, while only one in 10 Whites and Asians did.

Black households who did have retirement savings extended a helping hand “even when they didn’t have the cash on hand themselves,” she said.

Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBC. To stay current on our blog, please join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here.  This blog is supported by the Center for Retirement Research at Boston College. 

Wendy Weiss

Excellent piece. So glad Squared Away has clarified the reasons underlying inequality in retirement and it’s implications for differential wealth.

Jennifer Lee

It is not just blacks and Hispanics. White single Mothers and women, in general, receive less money in lower-paying jobs. It does not matter if you are black white or green if you are in a lower-paying job, it is hard to save for retirement.


Some workers just won’t take advantage of retirement savings programs. I urged co-workers to join the very generous plan our company offered, explaining that they would gain an immediate match on their contribution, plus the growth on their fund; they should contribute at least enough to get the full match. They usually refused, no matter how well paid. Retirement was years away, this vacation or that new electronic gadget was more important now.

Xavier Piedom

I’m wondering what the real statistics on this are. My wife received $40,000 when her parents died. I received $20,000. These are not life-changing amounts of money. I also paid for most of my college degree. Of the students I went to high school with, most of them were in the same position.

It’s convenient to point to “inter-generational wealth” as a major contributor to the issue, but in my case the inheritance was not meaningful.

    Kim (blog writer)

    Dear Xavier – Good question.

    You’re correct that the range of individual experience is very wide. But Professor Francis used data from the U.S. Federal Reserve’s household surveys, conducted every three years, to come up with data for each racial group separately.

    Thanks for reading the blog!


    You don’t get it. So you and your wife received a total of $60,000. That is a life-changing amount for some people. Apparently your school is located in a middle to upper middle class neighborhood.

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