Dear Black Women,
You are highly educated, very successful and achieving all of your career goals. You are also outliving both white and black men. However, your success belies the fact that you are not saving enough for retirement - and most of you don’t know it. Below we discuss the many roadblocks black women face in securing their retirement over their entire lifetime and the key to overcoming those challenges.
The lack of generational wealth and the black woman’s sense of financial responsibility for other family members are some of her roadblocks to accumulating as much wealth as she should over her lifetime. In 2018, the American Journal of Economics and Sociology provided insight into the generational wealth of black Americans: Among college-educated Black families, the average amount of inheritance—including cash, home, and other assets—is under $40,000, compared with over $150,000 for college-educated white families. About 87 percent of those Black families receive less than $10,000, compared to only 60 percent of white families in the same category.
Anne Price from the Closing the Racial Wealth Gap Initiative at the Insight Center for Community Economic Development, explains that Black women are more likely to find themselves taking care of family members financially. Price estimates that this responsibility decreases a black family’s wealth by approximately 27 percent.
Unfortunately, in 2020 sex and race are still factors that help determine income - and reveal other roadblocks. Both black and white women are completing four-year degrees at a faster rate than their male counterparts. Further, at each level of higher education, black women receive a higher percentage of degrees within their race/ethnic group than did women in any other major group. One would assume that these academic accomplishments would translate into higher income. However, while white women’s average earnings are 81 percent of white male earnings, black women make 65 percent of the average earnings of white men. According to the Institute for Women's Policy Research, full-time professional white women who work year round are expected to receive full pay equity in 35 years.
The marital status of a black woman also impacts her income. According to the Brookings Institute, black women with an undergraduate degree, ages 35 to 45, are 15% less likely to get married than white women without an undergraduate degree. If black women do marry, their husbands are less likely to have an undergraduate degree. As a result, improvements in the individual economic position of black Americans do not translate into equivalent gains at the household level.
Further, Duke and Insight researchers reported that a single, black woman in her 20s with a bachelor’s degree has a median wealth of −$11,000 (she has more debt than assets). For married Black women in their 30s with a bachelor’s, it’s −$20,500. In contrast, a married white woman in her 30s with the same degree has a median wealth of $97,000. Also, single white women without a college degree have $3,000 more in median wealth than single Black women with a bachelor’s degree.
BE PREPARED: INVEST EARLY AND WISELY
Now that we have discussed some of the financial roadblocks that professional black women face when building wealth, let’s dive into the importance of investing wisely during those income producing years.
According to research from the Center for Disease Control, White women have a life expectancy of about 81 years, while white men have a life expectancy of about 76 years. The differential between male and female life expectancy is greater among Blacks than Whites. Black males can expect to live 71 years, 7 years shorter than Black females (78 years).
The evidence is clear that women outlive men; and as such, their expenses need to extend further into the future. Yet, according to many studies, women are underprepared. According to Ellevest, women are less likely to invest than men: Of all of the assets controlled by women, 71 percent of these assets are not invested. Even those women who do invest tend to wait until they are older to start. Oddly enough, According to a study by Merrill Lynch, 41 percent of women wish they invested more of their money. Meanwhile, men are five times more likely to name investing as their number one financial goal.
Married women often incorrectly think about investing and saving as the sole providers to their household for years longer than their spouse. Widowed women can live decades beyond their spouses, and many financial plans are not reflective of this fact. Both married and single women are falling short of the appropriate level of savings they need to retire, compared to their life expectancy. Research shows that if a man and woman both enter the workforce at the same time and the man saves 10 percent of his income, the woman will need to save 18 percent of her income in order to reach the same level of wealth at retirement. Part of this is because women are more risk averse, they are paid less than men, and they are not in the workforce as long as men. But what this means is that even if women are saving the same percentage of their income as men, they won’t have the same amount saved at retirement.
It is also noteworthy to point out that in retirement, women spend more money than men on healthcare. Women have a tendency to get chronic diseases later in life, which can be expensive.
Without an adequate investing strategy, black women are forced to have less money to last them a longer period of time. The important things for professional black women to do are: 1) invest early; 2) invest wisely; and 3) speak up!
For those women who are investing early and wisely, the results are paying off (pun intended). Surveys show that women do more research, are better at matching their investments to their goals, trade less and remain calmer during market upheavals. On average, the portfolios of female investors hold up better than those of their male counterparts during a downturn. The keys to their success have been (among other things) remaining calm, having a strategy, and working with knowledgeable financial professionals to educate themselves.
DISCUSS YOUR FINANCES AND EDUCATE YOURSELF
Aside from being less risk averse than women, studies show that men are more comfortable discussing their finances and how much they know (or do not know) about them. A CNBC study showed that black professional women were less likely than their white counterparts to have nothing saved for retirement. However, 24 percent of black women did not know how much they had saved, compared to 11 percent of white women. Further, a 2015 study by Financial Finesse revealed that 84 percent of men had a general knowledge of investing, compared to 64 percent of women. Overall, the men in the study scored higher than women when questioned about stocks, bonds, assets, and other financial topics. Reportedly, women find talking about money to be taboo. However, their level of discomfort contributes greatly to men having a poverty rate in retirement that is half the poverty rate of women in retirement.
Are you confident you are making smart decisions now to ensure that your money lasts as long as you do and that you ultimately leave a legacy for your family? For a better perspective on investing wisely, CLICK HERE.