The U.S. Supreme Court decision legalizing same-sex marriage one year ago led to widespread optimism that the lives of LGBT people would improve.
The sentiment was particularly strong in regard to same-sex couples: The ruling would avail them of federal marriage rights and privileges enjoyed by their heterosexual counterparts.
That indeed has been a result for a segment of gay men and lesbian women who have tied the knot. But as a recently released report of Prudential Financial makes clear, the financial picture for married couples, and the broader LGBT community, is decidedly mixed.
Prudential’s survey, “The LGBT Financial Experience: 2016-2017,” first explored in a recap of a Prudential press briefing on the study by sister publication ThinkAdvisor, shows that a greater percentage of LGBT people feel greater financial confidence. But compared to four years ago, many among them also are experiencing financial-induced stress.
The concerns they share mirror in part issues — pay inequality, workplace insecurity, pension survivor benefits — that LGBT Americans have long contended with.
The concerns can also be attributed to broader macroeconomic challenges confronting the general population: stagnant wages, the outsourcing of manufacturing jobs to overseas competitors, as well as technological change that is disrupting entire industries.
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Eye on the methodology
Conducted by Chadwick Martin Bailey last May, the Prudential online survey gathered answers from 1,376 LGBT people and 503 individuals from the general population. Among the more intriguing numbers are demographic statistics about the participants.
A majority of the LGBT respondents identify themselves as bisexual. Of these, 6 in 10 are women. In contrast, just 15 percent of the women surveyed describe themselves as lesbian. That compares with nearly 1 in 3 (32 percent) of men who are gay.
Not surprisingly, more than 7 in 10 (72 percent) of the respondents are white, a proportion that reflects their representation in the larger population (71 percent). Ethnicity aside, millennials (ages 25 to 37) make up nearly half (47 percent) of the LGBT interviewees.
How to account for their disproportionate share, given that boomers (ages 52-70) are nearly as large a demographic group, but account for just 28 percent of the respondents? The answer, panelists noted during the Prudential briefing, held in New York City on June 23, stems in part from the fact that millennials feel less constrained about “coming out” to reveal their sexual orientation.
“People are coming out much younger because the world allows them to, which is fantastic,” said Prudential panelist and Reuters Money Editor Lauren Young. “And because millennials are much younger, they can start planning at a much younger age. We all know about the power of compounding; if you start planning for retirement in your 20s versus your 40s or 50s, you’ll be ahead of the curve.”
The report’s authors acknowledge that the relative youth of the survey respondents — 45 percent of lesbians and 58 percent of bisexuals are millennials — skew the results; findings about the financial health and preparedness of the LGBT population reflect to a greater degree the issues and concerns of those in their 20s and 30s.
The report also flags gender differences — notably in respect to income — both within the LGBT community and relative to the larger population. Bisexual men earn (on average) a whopping 136 percent more than bisexual women ($85,084 vs. $35,980); and gay men earn 25 percent more than lesbian women ($56,936 vs. $45,606).
Additionally, heterosexual men earn significantly more than both homosexual men ($83,469, vs. $56,936, respectively); and heterosexual women ($51,461).
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Challenges LGBT people face
Members of the LGBT community, irrespective of age or other differences, share a host of financial issues and concerns. One big one: the failure to prepare adequately for retirement or financial emergency.
Take product ownership. Compared to the general population, fewer LGBT people hold the following the insurance and investment products:
Savings accounts (40 percent/LGBT vs. 47 percent/general population).
Employer-sponsored retirement plans, such as 401(k)s and 403(3)b plans (35 percent vs. 40 percent).
Individual retirement accounts (18 percent vs. 30 percent).
Employer-sponsored pension plans (18 percent vs. 23 percent).
Mutual funds (15 percent vs. 21 percent).
Individual stocks (18 percent vs. 23 percent).
Life insurance (42 percent vs. 54 percent).
Long-term care insurance (10 percent vs. 12 percent).
What’s more, fewer LGBT people have a will or estate plan (19 percent vs. 26 percent for the broader population). In the wake of the Supreme Court decision, one might speculate this difference will narrow over time, but not necessarily: Tax considerations aside, federal recognition of marriage has freed same-sex couples of wealth transfer planning (e.g., establish complicated trusts) that otherwise would be needed to protect assets absent that recognition.
But the Prudential panelists noted marriage entails its own financial challenges. Among them: retirement planning, caring for children, securing healthcare insurance or Social Security benefits and, not least, tax planning.
“Many same-sex couples are surprised to learn the first time they file a joint return that they’re in a different income tax bracket,” said Reuters’ Young. “A growing number of them also are having to pay the alternative minimum tax, which used to be assessed only on the wealthy.”
Differences between the LGBT community and general population are evident, too, in the financial concerns survey respondents share. One-third of LGBT people, for example, say they’re “making ends meet,” but are struggling. That compares to less than a quarter (23 percent) of the general population. More of those within the LGBT than the general population also say they’re “unable to keep up” in paying the bills (8 percent vs. 4 percent).
Compared to their counterparts in Prudential’s earlier 2012 survey, more LGBT people this year also are straining to cover living expenses (33 percent vs. 25 percent, respectively); or are failing to do so (8 percent vs. 6 percent).
Glenda Testone, a panelist at the Prudential press briefing and executive director of the LGBT Center in New York (pictured in the panel, second from right), said the issue is particularly acute for members of the transgender community.
“Many transgender people who visit our center have extreme financial and economic challenges,” she said. “One-third of transgender people of color are trying to live on less than $10,000 per year — well below the poverty line. Women in LGBT community, particularly those with low incomes, also are facing financial issues.
“These are key reasons why we launched two programs: (1) a women’s economic opportunity program and (2) a transgender economic opportunity program,” she added. “These programs aim to give women and trans people the tools they need to build a foundation on which to support themselves financially.”
The Prudential survey also observes dips between 2012 and 2016 in the percentage of LGBT people who say “I’m not part of the 1 percent, but things are good” (11 percent in 2016 vs. 20 percent in 2012); and who state “I’m living modestly, paying the bills and staying independent (33 percent in 2016 vs. 47 percent in 2012).