Closing the Racial Retirement Gap

3 minute read

Over the past many decades, a complex and changing retirement system and low savings rates, among other things, has led to a looming retirement income crisis facing millions of Americans across all demographics. However, thanks to a variety of unique circumstances, Black Americans face even greater struggles when it comes to saving and planning for retirement, a phenomenon known as the racial retirement gap.

In 2016, the typical Black household approaching retirement had just 46% of the retirement wealth of the typical white household according to a University of Massachusetts Boston study. That gap has steadily grown since then, and the pandemic only worsened the situation even further. The data shows that two-thirds of single Black retirees have incomes below the so-called “Elder Index”, which measures retirement security and the ability of older people to cover their basic living expenses.

Jennifer Streaks, columnist and video correspondent for TheStreet, focuses on long-term investing and personal finance and shares her expertise to address how Black communities are economically impacted.


Jennifer Streaks, personal finance expert and columnist, joined Jean Chatzky on Your Money Map to discuss racial disparities in retirement on February 16, 2022.

Why is there a racial retirement gap?

Experts have discussed three main factors that drive the retirement gap: Financial health, access, and income. The disparities in these factors stem from racial bias in the labor market, including historical discrimination in hiring, pay, promotions, and benefits, making it difficult for Black Americans to accumulate generational wealth. Even today, it can be difficult to save money for retirement, as occupational segregation and hiring discrimination still persist.

Lower rates of financial literacy have added to these problems. Recent research from the TIAA Institute shows that financial education for Black Americans has lagged the overall population, creating a disproportionate ripple effect on how Black Americans save for retirement. Public policy changes decades ago created a shift from company pensions to do-it-yourself retirement savings plans such as 401(K)s and IRAs, thereby placing a greater burden on individuals to figure out how to invest their savings and manage their own financial risks in retirement.

Effects of the COVID-19 pandemic on retirement income

Since the pandemic hit, unemployment rates for older Black and Latino workers have been much higher than for their White counterparts, and millions are being forced into an early or premature retirement. Unemployment and early retirement have several financial consequences. Beyond lost savings and costly disruptions in employer-provided health insurance, an unplanned retirement can lead to claiming Social Security early and missing out on significantly higher Social Security payouts if people delayed claiming for just a few more years. This, while keeping in mind that Social Security only replaces about 40% of our pre-retirement income, leaves a large gap in protected income.

Closing the gap

Though closing the racial gap is a complex issue, tackling complexity often begins with taking small steps. The good news is that Black Americans have been talking about money and investing more since the pandemic began. Learning and embracing simple financial principles is of course the first step. Next comes taking a holistic view of your current and future finances, keeping in mind that you may need your savings to last 20, 30, or more years in retirement. Check-off the basics – those essential monthly expenses you have to pay for – to get a clear picture of the actual income you’ll need in retirement. After all, if you don’t know how much money you’ll need, how will you know how much to save?

If you’re like the ever-increasing number of independent Black workers or self-employed Americans that don’t have an employer-sponsored plan, there are other retirement savings options available, including setting up a traditional IRA or a Roth IRA. In addition to investing in the market through things like mutual funds, you should consider including a source of protected income like an annuity, to fill the gap that Social Security leaves.

Protected income from an annuity can help cover your basic expenses, giving you the freedom to spend the rest of your savings on the things you want to do in retirement. And if you find yourself prematurely retired, guaranteed income from an annuity could also act as a stopgap that helps you delay claiming Social Security to maximize those benefits.

Lastly, you should consider getting the help of a financial professional. There’s an old myth that financial professionals are only for the wealthy, which is untrue. Look for someone who takes the time to understand your specific needs and goals, shares your values, and can help you create a comprehensive plan that focuses on retirement income. You can learn more about finding the right financial professional at

Go deeper on the causes of the racial retirement gap and learn about nine ideas for closing that gap in this Bankrate article.

Stay informed with the latest updates on protected income planning.