The 31st annual Retirement Confidence Survey, the longest-running measure of American workers’ and retirees’ attitudes about retirement preparedness, found Americans in 2021 have near-record-high confidence in having enough money to live comfortably through retirement despite the Covid-19 pandemic that lasted throughout 2020.
But not all Americans were so fortunate: The survey also found that many workers and retirees — particularly Black and Hispanic Americans — who were most affected by the pandemic were the least able to handle the financial fallout and are the least confident about their retirement prospects.
For the first time in more than three decades, the Employee Benefit Research Institute, which conducts the annual Retirement Confidence Survey, included an oversample of Blacks and Hispanic Americans to allow for a closer analysis of the challenges they face in saving and preparing for retirement.
New questions were also added to this year’s survey to explore the impact of the Covid-19 pandemic, evaluate priorities in preparing for retirement and understand experiences with the financial system that may affect Black and Hispanic American’s retirement preparation.
Nearly half of all retirees in the survey said they retired earlier than expected but the top reason differed by race. While white retirees said they could afford to retire earlier than planned, Black retirees said they had a health problem or disability that forced their early retirement.
Both Black and Hispanic Americans are more likely to have lower incomes and assets. This is a critically important consideration as financial resources have historically had a clear correlation to retirement confidence. But beyond lower income and assets, the survey uncovered different attitudes about saving for retirement, perceptions about financial advisers, and unmet advice needs that could improve retirement preparation and outcomes for American minorities.
Confidence in having enough money to live comfortably in retirement increases with income regardless of race or ethnicity. For example, in the upper-income group of $75,000 or more of annual household income, 86% of white Americans, 84% of Black Americans and 85% of Hispanic Americans reported that they were confident about their retirement prospects.
But the wealth gap between white Americans and Black or Hispanic Americans remains even as income rises. Lower-income (less than $35,000 annual household income) and middle-income ($35,000 – $74,999) Black Americans were more likely to report savings of less than $1,000 compared with white Americans. Likewise, the share with the highest amount of assets ($250,000 or more) was much higher for white Americans than for Black or Hispanic Americans for both middle and upper incomes.
Hispanic Americans, regardless of income, were more likely to agree that it is more important to help friends and family now than to save for their own retirement. Upper-income Black Americans were also more likely to agree that family is more important.
Hispanic and Black Americans are more likely to say that a connection or commonality between them and a financial adviser is important. That includes a preference for working with an adviser who has a similar upbringing or life experiences to them; working with an adviser who is affiliated with their employer; and working with an adviser who has a similar racial or ethnic background or is the same gender as they are.
Black and Hispanic Americans reported disproportionately lower financial resources, which clearly affected their sentiments about retirement and financial security. But the survey results pointed to some modifications in the financial system that could help improve their prospects, including access to workplace retirement savings plans that provide one-on-one personalized advice.
In addition, many Americans, but especially Black and Hispanic Americans, would benefit from a more holistic approach to financial wellness in the workplace that helps them balance competing financial priorities such as debt reduction, supporting family members and their own long-term savings, according to the report.
The bottom line refocuses the importance of gender and racial inclusion in the ranks of financial services professionals to improve better retirement outcomes for all Americans.
“Financial services companies having more people that are similar to Black and Hispanic Americans and treating them fairly could improve their use of the system,” the report found.
(Questions about Social Security rules? Find the answers in Mary Beth Franklin’s 2021 ebook at MaximizingSocialSecurityBenefits.com.)
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