Black and African American retirement gap may result in more Employment Extenders, even as health inequalities and caregiving may cut careers short
By Jessica Tuman, Head of Voya Cares and ESG Practice COE
Voya Cares’ recent research study looked at the increasingly older workforce in the U.S. and whether employers are ready to support the growing number of those working past typical retirement age, as they extend their working life and prepare for retirement.
Our findings showed a mixed set of motivations for working longer, with the majority saying they are doing so for socialization, to stay sharp or generally because they enjoy their work. Yet, paradoxically, an equally large number say they are not prepared to retire, with 60% having saved $500K or less. Are they working longer because they want to, or because they need to?
Statistically, Black and African American workers in the U.S. often are less prepared for retirement and may be planning to or delaying retirement in larger numbers than their peers. For this segment of the workforce, employers must be especially vigilant to support and sustain their extended work life and help them prepare for retirement, when they are ready to make that life change.
This trend in a lack of retirement preparedness often is due to lower wages, home ownership rates and little-to-no savings or investments, resulting in less disposable income during working years and more difficulty saving and accumulating wealth and savings for retirement.
In fact, only 64 percent of Black and African American individuals in the U.S. have some retirement savings, slightly higher than the 61 percent of Hispanic Americans and significantly lower than the 80 percent of white Americans. This absence of retirement savings may be in part due to a lack of knowledge of or access to individual or employee-sponsored retirement accounts: Just 45 percent of Black and African American families have them, again ahead of the 34 percent of Hispanic families and far below the 60 percent of white families.
Because of all of these reasons, this community has a large dependency on Social Security, and it’s worth noting that the average Social Security benefit is only $1,500 a month; however, workers who wait until age 70 to begin receiving payments collect a higher amount of about $3,000. Ultimately, “Black seniors (18 percent) are almost three times as likely to live in poverty as white seniors (6.8 percent). Seventeen percent of Hispanic seniors and 9.3 percent of Asian seniors live below the poverty line.”
Although the desire to work longer seems like a simple one, it is further complicated by numerous studies that have noted that Black and African Americans tend to have worse health than many counterparts, including chronic diseases and disabilities, leading to shorter and less-healthy lives. As a result, working longer to save more and collect the highest Social Security payment may not be possible.
For both men and women in this community, their health problems limit their ability to continue working. But many Black and African American women, in particular, have to continue working because of declining income as they age.
Employers who offer health intervention programs to employees of all ages can help Black and African Americans improve their long-term health outcomes.
Women in this community also often end up as long-term caregivers for aging and ailing parents and spouses or caring for grandchildren, forcing them to leave jobs and cut their careers short.
For Black and African Americans who can work passed their typical retirement age, employers are in the best position to help close the retirement gap as they work and into retirement. Participants in the Voya Cares and Easterseals study indicated resources that they’d like their employers to provide, all of which are particularly important for the community’s aging workforce:
- Awareness and education on topics around retirement planning are clearly important, but, for this population, adding in education around health risks as they age and how to manage them also should be part of the awareness-building plan.
- Guidance tools to help maximize benefits decisions can assist older Black and African American employees to understand how to participate in retirement savings vehicles — and often also benefiting from company matches — without sacrificing investment in health benefits.
- Resources for caregivers may help Black and African American women, who are increasingly likely to become caregivers and to leave the workforce, stay employed. Tools such as flexible work hours, work-from-home options, emergency back-up care, leave-management benefits and caregiving concierge services are especially impactful to this group.
- Health and wealth benefits can help meet unique needs: Health Savings Accounts (HSA) can help pay for medical expenses as they age and for post-retirement health needs. Emergency savings plans help protect retirement savings, retirement plan options can provide a predictable non-guaranteed stream of income to supplement Social Security Income.
Making the decision to extend employment past traditional retirement age is a complicated one for an increasing number of aging workers in the U.S. Employers can help make this decision a bit easier for all their employees, especially for those in the Black and African American community, by promoting physical, emotional and financial wellbeing. With healthy aging and a strong retirement savings plan, employees will be deciding to work longer because they want to, not because they must.
This material is provided for general and educational purposes only; it is not intended to provide tax or investment advice and is not intended to be used to avoid tax penalties. All investments are subject to risk. Neither Voya<® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.
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