Poverty is typically framed around income as the main determinant of economic instability. While income is significant, it only comprises a piece of the full economic picture. Wealth, defined as assets minus overall debt, is another important contributor to economic mobility and financial stability. An individual’s well-being and long-term financial sustainability is derived from the ability to build and acquire assets, such as savings, homes, cars or businesses. Around 55% of Americans live in asset-poverty which means they lack sufficient wealth to sustain a livelihood above the poverty level for at least 3 months. About 40% of those adults are liquid asset poor and therefore lack resources that can readily be converted into cash (e.g. savings or stocks). Asset poverty minimizes the ability to afford retirement costs during later stages of life. Variations in race and gender may exacerbate the ability to comfortably age in place.
The distribution of wealth in the United States is incredibly unequal.  As of 2019, the median net worth for White households was $127,390, compared to $8,050 for Black households and $16,610 for Latinx households. Additionally, 29.3% of Black households had zero net worth, compared to 13.4% of White households. According to a 2019 report from Prosperity Now, the rate of liquid asset poverty for Black and Latinx households (62.7% and 62.5% respectively) is approximately twice as high as White (31.7%) and Asian (27.9%) households, fundamentally limiting the former’s economic mobility.
Households made up of racial and ethnic minorities lack access to wealth-building opportunities. One of the most common wealth building assets is a home. Although owning a house is not a liquid asset, it provides an opportunity to build credit and acquire resources (e.g. home equity loans, home equity lines of credit), but Black and Hispanic individuals are less likely to own homes than non-Hispanic Whites. The homeownership rate for White households is 71.9%, compared to 41.4% for Black households and 47.2% for Hispanic households. Therefore, White households hold more equity than both Hispanic and Black households solely through homeownership. Although the historic gap in homeownership rates has decreased between Latino households and non-Hispanic White households, it has widened between non-Hispanic White and Black households. For many households in the baby boomer generation (adults born between 1946 and 1964), homeownership is no longer the guaranteed financial support it once was, which is an especially great concern as their assets are primarily in home equity.  Housing today has become a significant expense. Compared to a decade earlier, fewer adults over the age of 50 own their homes outright, and many more are paying a higher percentage of their income on housing. 
Among other wealth-building opportunities are savings and stocks, which provide greater asset liquidity than home ownership. In both of these categories, racial and ethnic minorities are also underrepresented. Less than 50% of the U.S. population owns stock.  After the 2009 recession, African Americans lost 71% of their stock investments compared to a 9% loss for non-Hispanic White households.  Some suggest that the gaps in stock investment result from risk averse attitudes and unfamiliarity with the stock market that characterize many minority households.  As a result of the income gap, disparities in employment with strong retirement savings programs and overall widespread asset poverty, racial and ethnic minorities lack sufficient retirement savings.
Asset-poverty and Later Stages of Life
Asset-poverty continues to affect individuals during later stages of life. According to a 2010 study on poverty among older adults, by the age of 75-79, 54.8% have experienced liquid wealth asset poverty and 29.1% experienced net worth asset poverty. Racial and ethnic minorities continue to be disproportionately affected by asset poverty at this age. Lower lifetime earnings along with significantly fewer retirement resources result in a persisting wealth gap among older adults. African Americans between the ages of 50 and 65 only have about 10% of the wealth their White counterparts have. The median retirement savings for Latino and African American families in 2016 was around $23,000 and $29,000 respectively, compared to $79,500 for non-Hispanic Whites.  The traditional “three-legged stool” model of retirement, which typically includes assets, pensions and Social Security, is no longer an option for many older adults; the use of pensions is steadily declining. In 2016, White families had six times more liquid retirement savings on average than Black and Hispanic Families — the gaps have increased fivefold over the past quarter century. 
Racial and Gender Disparities in Lifetime Earnings
Lifetime earnings disparities have left racial and ethnic minorities with limited retirement savings, especially when those identities intersect with gender. A Black man averages lifetime earnings of $1.8 million compared to $2 million for a Hispanic man and $2.7 million for a White man, but the lifetime earnings of minority women are more stark. Hispanic women make about $1.3 million over their lifetime, and Black women make $1.1 million compared to the $1.5 million earned by White women.  Race and gender seemingly intersect within these lifetime averages. As a result, minority households and especially those with minority women rely more heavily on Social Security benefits and other public assistance services when they retire than available savings or retirement funds.
Reliance on Social Security
The typical Social Security benefit replaces less than half of an individual’s earnings, averaging just slightly more than the individual federal poverty guidelines ($12,760 for individuals). According to an assessment of Survey of Income and Program Participation (SIPP) data by the National Institute of Retirement Security, both White and Black women lean on Social Security as their main source of income. Comparatively, Latina women rely on Social Security for approximately 46% of their income. Black men also rely on Social Security as the main source of their income, the only male racial group to do so. Less access to retirement saving vehicles, lower participation, early withdrawal from savings and historic discrimination all play a role in the creation of asset poverty among minority populations. Consequently, older minority adults may not be able to weather significant emergencies or financial shocks that are common among the age group (e.g. health emergencies, housing repairs and the need for home modifications to facilitate aging in place).
Gender and Race Intersect
As women continue to comprise the largest group of older adults in this country (as of 2018, older adult women outnumbered older adult men by nearly 6 million), they continue to be disadvantaged up to and including retirement. Women generally work lower-income jobs, receive lower pension benefits and save less for retirement than male counterparts. Due to societal norms and traditional expectations, women are more likely than their male counterparts to work part-time or interrupt work to become primary caregivers to children or another family member. As a result, women have less money in pensions and retirement savings. Statistically, women are more likely to spend later adult years alone, subsisting on their own income and retirement savings. This lack of resources paired with a slight lifespan longevity (taking into account racial health disparities) puts women, and particularly Black and Brown women, at an economic disadvantage for late stage economic security in comparison to men. Furthermore, older adult women are far more likely than men to be poor, regardless of race, educational background and marital status, taking into account out-of-pocket medical expenses and other factors in addition to income.
Barriers to Financial Stability and Retirement Reform
Asset poverty is a major barrier to financial stability for many households in the United States. Without access to asset-building opportunities throughout their lifetime, older adults cannot easily withstand negative financial shocks during retirement. Solutions to poverty typically focus on income, and while this is a critical factor, income alone does not hold the key to sustainable economic stability, especially as many older adults may not be able to work as they age. As gaps in homeownership, savings rates and other financial capital persist between racial and ethnic minorities, especially for minority women, economic mobility will remain stagnant. Therefore, asset poverty will inevitably persist into the later part of life and affect older adults’ ability to age in place. As the population ages, older Americans’ ability to afford necessities may be strained. This is especially true for older Latina/x and Black women. The Federal Reserve Bank of St. Louis identified some “headwinds” that non-White families confront in creating wealth; these include:
- Lack of liquidity to weather financial setbacks.
- Greater reliance on debt to finance education or home purchases.
- Different returns on assets such as education and housing.
Despite some progress, barriers to asset-building remain. Efforts to alleviate poverty among these populations must assess the impact of asset poverty and consider ways to improve both income and wealth to help individuals and households. The current retirement strategies, such as employee-funded 401(k)s, are replacements for employer funded pension plans that not long ago were standard in the U.S. However, 401(k)s exacerbate wealth inequality. The bottom 60% of working-age families hold only 13% of the retirement account balances and receive only 23% of the benefits while the top 20% of working families hold 70% of the retirement account balances and receive 59% of income. Low-income working families, in which racial and ethnic minorities are overrepresented, lack access to retirement plans and opportunities to build assets for the future. Additionally, Black and Hispanic populations have lower participation, lower contribution rates and make hardship withdrawals on retirement plans more frequently than their White counterparts. Racial and ethnic minorities face fewer opportunities to invest in their future and face economic shocks more frequently than their White counterparts, leaving them with fewer resources to allocate towards retirement. Reforms to retirement strategies must take into account the many barriers that racial and ethnic minorities face in order to offer sustainable future investment strategies that adequately facilitate all the ups and downs of aging in the United States.
Karen Kali is NCRC’s senior program manager for special initiatives.
Roxana Ruiz was a NCRC special initiatives intern.
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