Massachusetts’ Black and Hispanic residents have saved far less money for retirement than their white counterparts, according to a new report released Wednesday by Boston Indicators.
The report found that between 2018 and 2022, the median value of white residents’ 401(k) accounts was about $60,000, while Hispanic residents’ accounts were $30,000, and for Black residents the figure was just $5,000.
Luc Schuster, executive director of Boston Indicators, said the disparities come partly from workers of color participating in retirement programs at lower rates.
“Now that’s often for very valid reasons,” Schuster said. “Those workers [are] needing that stream of income in the near term more than their white counterparts, because they have less other sources of wealth or financial support to make ends meet. So, I mean, just if you think about it for yourself, if you were living paycheck to paycheck, it’s just going to be much harder to dedicate 5-10% of your income in a given month to that longer term savings.”
On top of that, the report found there is not equal access to retirement savings accounts. About 60% of white workers in Massachusetts have access to a retirement plan through their jobs, compared to 52% of Black workers and 44% of Hispanic workers in the state.
“Retirement assets are a much bigger piece of the puzzle than many people appreciate. … And this is especially the case for Black families: for the typical Black family, retirement assets make up 40% of total wealth,” said Schuster.
And financial problems can seep across generations of families. When older residents have limited retirement savings — or zero retirement savings — that burden often falls on their adult children.
“Latino families face unique challenges: being their parents’ retirement plan,” said Roxanna Sarmiento, the director of marketing and communications for the advocacy group Amplify LatinX.
She said while the 401(k) retirement plan is imperfect and many workers still don’t have access to one, it is one of the best tools to help families build generational wealth. She wants to see more equitable pathways.
Schuster said there are other gaps to address, too. Only 44% of those with high school diplomas in the state can access employer-based retirement plans, whereas 70% of those with college degrees can. And such plans are more readily available to people earning higher wages, with 81% of workers earning more than $78,000 a year having access to a retirement plan through their job, compared to 40% of workers who earn $18,000-$31,000 a year.
He said a proposal in the Legislature, the Massachusetts Secure Choice Savings Program Act, would establish a retirement savings program for all workers, similar to a 401(k), regardless of whether such a program was offered by their employer.
“It’s really important that in the last five or 10 years, there’s been a growing civic conversation around the need to reduce the racial wealth gap in Massachusetts,” said Schuster. “And there’s been a lot of efforts to especially boost homeownership among families of color, to improve entrepreneurship and support access to capital for new business owners of color. … What this paper finds is that retirement savings and retirement assets are also a really important piece of the wealth puzzle.”
