Measuring Racial/Ethnic Retirement Wealth Inequality

Abstract

As the US population becomes more diverse, it will be increasingly important for policymakers addressing Social Security’s solvency to understand how reliant various racial and ethnic groups will be on the program versus other sources of retirement wealth. Yet, to date, studies on retirement wealth have tended not to focus on race and ethnicity, have largely ignored the role of Social Security, or have excluded the most recent cohort approaching retirement—the Late Boomers. This project uses data from the Health and Retirement Study (HRS) to document the retirement resources of White, Black, and Hispanic households at various points in the wealth distribution for five HRS cohorts of 51- to 56-year-olds between 1992 and 2016.

TOPICS: Retirement, wealth management, social security

Key Findings

• ▪ In 2016, the typical Black household had 46 percent of the retirement wealth of the typical White household; the typical Hispanic household had 49 percent. This inequality would be much higher but for the presence of Social Security.

• ▪ The 1992 to 2010 HRS cohorts showed little change in retirement wealth inequality, although a decline in 51- to 56-year-old White households’ retirement wealth between 2010 and 2016 narrowed the racial and ethnic gaps in retirement wealth slightly.

• ▪ The progressivity of Social Security, combined with lower average incomes for minority households, means that replacement rates are more equal than wealth—in 2016, the replacement rate of Black households was 82 percent of White households and Hispanic households was 95 percent.