Resource Category: Retirement and Savings

The authors find that high-earning workers are three times as likely as low-earning workers to have access to an employer-sponsored retirement plan. These disparities also play out along racial lines, with Black and Hispanic workers less likely than white workers to participate in an employer retirement plan.

Another important finding is that older Black workers are actually more likely than others to participate in traditional defined benefit retirement plans. These higher-quality plans are more common in unionized public sector jobs, and this is one area of the economy where Black workers are a bit more represented in proportion to the overall population. Public sector union jobs have provided a rare opportunity for Black workers to enter the middle class and enjoy some baseline retirement security.

The authors also identify common barriers to full inclusion, including a lack of trust in financial institutions, language barriers, and a lack of familiarity with financial products. This research demonstrates that well-designed CSA programs can be one tool for encouraging children to develop financial literacy and start planning for their futures, but as designed this research does not provide evidence that these programs have any measurable long-term wealth building benefits.

On retirement savings: Authors build on data in the SCF to include estimates of defined benefit retirement plan value and estimated future Social Security benefits, which are otherwise often left out of estimates of total wealth.

Because Black workers have been more likely to work in public sector jobs that offer DB plans, including the value of these plans helps to somewhat close reported white/Black wealth gaps (although far from fully). These findings speak to the importance of retirement security, and defined benefit plans in particular, as a lever for boosting family wealth. Some researchers have pushed back against the inclusion of DB plans since this “wealth” is illiquid in times of emergency, but other forms of wealth commonly included in wealth calculations are also quite illiquid (i.e. housing wealth).

Greater retirement security in the future also frees up financial resources in the near term to be spent on other wealth-building strategies like financial investments and business formation.

To provide specific estimates of Asian American wealth, which are often left out due to small sample sizes, authors pool data across 2016 and 2019 to generate a larger sample. When looking just at families with heads of household between 30 and 62, and after adjusting for differences in the age distribution, they find that Asian Americans are the highest-wealth racial group in the U.S: “(m)ean market wealth of Asian families was $1.2 million in the 2016/2019 year pair, compared with $927,000 for white families,” both of which are significantly higher than market wealth estimates for Black and Hispanic families.

Combined wealth estimates, which include defined benefit pension and social security values, increase to $1.7 million for the mean Asian family and $1.5 million for the mean white family. As with all racial groups, there are large intra-racial disparities that get masked by a focus on medians or averages, so this data should not suggest that there are not real asset-building needs among many Asian American families as well.

Specifically, the authors find that “balance requirements are higher and fee structures are more punishing among banks in black and Latinx communities net of controls for socioeconomic characteristics and the presence of competing financial services.” They argue that these findings are especially troubling, given that Black and Latino families are already more likely to have lower incomes and levels of wealth, meaning that these higher nominal banking fees carry an even greater burden for these families. Over the long term, these higher costs of everyday banking hamper their economic security and wealth building potential.