What You Need to Know
- BIPOC clients seem to be less likely to be getting professional help with their finances.
- Levels of worry may differ more than priorities.
- Some differences in priorities could be signs of a need for additional client education.
As diversity and inclusion has taken center stage with many aspects of American life, much has been written about the racial wealth gap and its effect on retirement planning for BIPOC (Black, Indigenous, and People of Color, including Hispanic and Asian/Asian Americans) communities. Perhaps most notably, the Brookings Institute found that the net worth of a typical white family is nearly ten times greater than that of a Black family. While this is certainly cause for concern, it’s not the whole story when it comes to wealth disparity between different races in the United States.
In fact, data from the Federal Reserve Board’s Survey of Consumer Finances found that both Black and Hispanic families have less median family wealth than white families with the same education. Furthermore, Black and Hispanic families are less likely than white families to own various types of assets (e.g., homes, businesses, financial and retirement assets) and have lower-valued assets when they do.
And although Asian Americans rank as the highest earning racial and ethnic group in the U.S., problems persist within this group when it comes to income inequality. According to the Pew Institute, from 1970 to 2016, the gap in the standard of living between Asians at the top and the bottom of the income ladder nearly doubled, and the distribution of income among Asians transformed from being one of the most equal to being the most unequal among America’s major racial and ethnic groups.
These findings are a clear indication that each BIPOC community needs more help with financial planning, something that was confirmed by recent findings from the 2021 Retirement Risk Readiness Study from Allianz Life.
What Your Peers Are Reading
The study team conducted an online survey in December 2020, with a nationally representative sample of 1,000 individuals age 25+ in the contiguous United States, and with an annual household income of $50,000 or more for single participants, or $75,000 or more for married or partnered participants; or with at least $150,000 in investable assets. The sample also included additional participants with BIPOC ethnicities.
The study team found that, across the board, fewer BIPOC respondents are getting professional help with their finances than white Americans (38% Black/African American; 44% Hispanic; 36% Asian/Asian American; versus 46% white).
While this demonstrates there is ample opportunity for our industry to assist BIPOC clients, it’s crucial that financial professionals understand that this opportunity is directly connected to developing a deeper understanding of each group and the specific retirement risks that concern them the most.
The best way to connect with these communities and really make an impact is to do the due diligence of learning about their unique concerns, not treating them as one homogenous group, and tailoring approaches to address how each BIPOC community thinks about retirement.
Similar Concerns, Different Levels Of Worry
First and foremost, the study found the majority of ethnicities surveyed – including whites – are currently worried they won’t have enough saved for retirement (52% Black/African American; 56% Hispanic; 56% white; 62% Asian/Asian American). Beyond the lack of professional assistance noted above, these statistics should get the financial services industry thinking about how we can be more effective in helping mitigate the specific risks that are causing each community the most concern.
Interestingly enough, the top concerns for BIPOC individuals are fairly consistent. Yet, Black/African American respondents tend to be less worried across the board, with Asian/Asian Americans the most worried and Hispanic respondents falling somewhere in the middle. Consider the top seven retirement risks identified in the study.
Top Retirement Risks
|Black/African American||Hispanic||Asian/Asian American|
|Health care costs will be so high you can’t afford the care you need||55%||66%||76%|
|The rising cost of living will prevent you from enjoying your retirement||54%||67%||74%|
|The cost of living will increase and you won’t be able to afford necessities||55%||63%||70%|
|That you won’t be able to take care of yourself||47%||60%||69%|
|Running out of money before your die||50%||64%||65%|
|The market will take a downturn and hurt your nest egg||52%||60%||66%|
|You’ll become a financial burden to your loved ones||37%||52%||55%|
While it’s logical to assume that different ethnic groups have different priorities when planning for retirement, it’s eye-opening to see just how varied the level of their concerns are and how that perspective likely affects their approach to spending and saving. This should, in turn, guide our approach to assisting each group.