For many Black Americans, even high-paying jobs aren’t enough to close the retirement savings gap with non-Black counterparts, a new study from the Employee Benefit Research Institute found.
The study, based on the institute’s annual retirement confidence survey, oversampled Black Americans this year to take a closer look at the challenges they face as they prepare for retirement. In total, researchers surveyed 520 Black workers and 481 Black retirees. Their findings reflect what some advisors describe as a “hangover” from historical and systemic barriers.
Even after controlling for income, Black Americans with higher earnings were less likely to have personally saved for retirement. Among those making $75,000 or more, 77% of Black Americans had retirement savings, compared to 87% of non-Black Americans.
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Total savings were also lower. At every income level, Black Americans were less likely than non-Black Americans to have $100,000 or more in savings, according to the study.
Stretching income across an extended family
Lazetta Rainey Braxton, founder of The Real Wealth Coterie in New Haven, Connecticut, said that stereotypes about Black Americans not being “good savers” are often used to dismiss the savings gap. But the reality behind that gap is much more complex, she said.
Broader familial obligations and larger debt burdens make dedicating money to retirement difficult, even for relatively high-earning Black Americans. Data from the U.S. Census Bureau shows that households headed by white Americans held 10 times more wealth than those headed by Black Americans, on average.
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“For many Black Americans, especially those who are first-generation wealth builders, reaching a six-figure salary may be just the beginning of financial security, not the culmination,” said Al Faber, founder of Los Angeles-based DIWY Financial Planning. “They’re often supporting not only themselves, but also family members and communities, which limits the capacity to save for long-term goals like retirement.”
When working with her Black clients, Braxton said she often dedicates a predetermined share of their income toward helping family members so they don’t feel like they have to give away any extra income they receive.
“I say, ‘OK, how much are you willing to help support, or can help support, your family in a year’s time?’ So we make that a bucket, and when you’re close to [filling] it, then that gives you permission to say, ‘This is all I can do,'” Braxton said.
Setting that limit helps clients invest in their own retirement while sharing the accountability for upward mobility across their family, she said.
Balancing debt payments and retirement contributions
Alongside familial obligations, advisors say that debt is another significant barrier for many Black Americans looking to build up their retirement savings.
Among people earning $75,000 or more a year, some 63% of Black Americans said that debt was a problem for their household, compared to 45% of non-Black Americans, according to EBRI. For many high-earning Black clients, advisors say that debt is often in the form of student loans.
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“What has been driven, particularly within the Black community, is education, education, education,” Braxton said. “And I am seeing a lot of student loan debt within the Black community, because that has been the ticket to get our community in a better position, to be competitive in a market that already has stereotypes about what we bring, even if we have the extra credentials.”
Earning such credentials comes at an exceptionally high price for Black Americans. Four years after graduation, Black students owe nearly three times — 188% more — what white students originally borrowed, according to the National Center for Education Statistics.
As federal repayment plans shrink, tackling that debt could become more difficult. But advisors say working with a professional planner can help put someone on the right path.
Advisors help build finance fundamentals
For many high-earning Black Americans, income alone is far from a panacea for the racial wealth gap, advisors say.
“Income is only part of the equation,” Faber said. “Wealth building depends heavily on education, generational assets, access to guidance and freedom from financial obligations that extend beyond oneself.”
For Americans who didn’t grow up in middle- or upper-class households, managing money can feel unfamiliar, even for those with high incomes.
“Many Black Americans are first-generation college, first-generation white collar and first-generation ‘high-earners’ in general,” said Nick Walls, a partner and financial advisor at Beauchamp Maleki Group in Milwaukee, Wisconsin. “What this means is that some of the things that are taken for granted, like saving into a 401(k) for retirement, were not examples Black Americans had growing up … It simply wasn’t their example, so how can they be expected to replicate something that wasn’t modeled?”
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When it comes to working with a client, advisors say that every situation is unique. But being aware of such experiences can be helpful when working with Black clients.
“While there is no one-size-fits-all for my clients, what I have found repeatedly is that mindset set shifts are necessary,” Braxton said. “Particularly with the Black population’s [mindset] of scarcity due to things that have been taken and pillaged from us in our history here, we can make the most of what we have if we do that intentionally.
“The less fear, obligation and guilt that we have as we engage how we live and have clarity, then that absolutely impacts your decision-making and your quality of life,” Braxton added. “For advisors, our responsibility is to meet people where they are, understand the circumstances … and then figure out if we have the capacity and the cultural resources to be able to support them with the technical aspects that we have learned about the craft of financial planning and wealth management.”
