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Black Americans planning for retirement

How to better support, build trust with, and understand your Black American clients

November 29, 2021

When it comes to financial planning, Black Americans often have to save more from less due to the persistent racial wealth gap and a variety of other systemic factors.

According to the Federal Reserve, the average white family’s wealth is 8 times that of the average Black family. Further complicating this, the average White household income is $72,204 whereas Black household income is $45,438.[1]

While these disparities exist, various trends indicate that racially and ethnically diverse communities are a largely untapped market with growing interest and need for financial and retirement income planning. According to the U.S. Census Bureau, the U.S. population is expected to become majority-minority in 2045.[2] 

Specifically, in the Black community, Black American buying power is on the rise due to increasing education levels, Black-owned businesses, and employment. Today, the Black population makes up roughly 13.4% of the population with over 1.4 trillion dollars in buying power.[3]

History of systematic inequality & racial wealth gap

To better serve your Black American clients, it is important to understand the challenges the Black community has faced.

Throughout history, Black Americans have dealt with many barriers and inequalities that didn’t put them on an equal playing field with white Americans. Up until the abolishment of slavery in 1865, Black people were not able to earn a wage. Following the emancipation of slavery, many laws were put in place to restrict and deny Black Americans the same opportunities and freedoms that white Americans had. Social Security was put into place in 1935, but most Black Americans were not able to take advantage of this new social safety net, as farmers and domestic workers were not allowed to take Social Security benefits. During this time, Black people made up 65% of those occupations.[4] Further, during a time when our country was faced with a housing shortage, the Federal Housing Authority, founded in 1934, refused to insure mortgages in or near Black communities, a practice called “redlining” preventing Black America from home ownership[5].

Prior to The Civil Rights Act of 1964, Jim Crow Laws legalized the segregation of black and white people in the south. This included public schools, transportation, and other public places. These laws continued to make it harder for Black Americans to gain wealth and prosper financially. The vast social injustice that existed prohibited Black Americans from employment opportunities, the ability to gather and build wealth, home ownership, education, and banking opportunities.

Building Trust With Your Clients

Most Black households are risk-averse; 55% say they are unwilling to take any financial risk when saving and investing.[6] Black consumers also tend to express higher levels of general distrust, with 61% reported low levels of generalized distrust.[7] For white consumers, this number is 32%.[8]

According to a study from Edelman, a majority of Black Americans reported having a negative interaction with financial institutions. “57 percent of Black Americans agree with the statement: “My personal finances would be better off if financial services companies treated people in my racial/ethnic community fairly,” vs. 31 percent of the general public.”

Financial Institutions have a duty to understand where their minority clients are coming from, and practice empathy. We also have a duty to increase diversity and inclusion in the financial services industry. Nationwide is proud of our long-standing commitment to diversity and inclusion in the financial services industry. One of the things that Nationwide is doing to support representation in the financial services industry is helping form the creation of the Financial Alliance for Racial Equity, or FARE. FARE was formed with the mission to increase racial diversity, drive greater equity, and foster inclusion within the financial services industry and the communities we serve.

Help your minority clients build for retirement now

While systemic racism has created disparities in Black communities across multiple facets of life including employment, wealth, home ownership, education and banking opportunities, there are ample opportunities to educate, address and solve for the wealth gap that exists.

It is never too late to help your clients start building for retirement and building financial wealth. Minority groups have faced and continue to face many barriers, as we previously discussed. The Department of Labor has laid out 7 important facts when it comes to helping your minority clients plan for their financial futures. These facts are important to further understand where your minority clients are coming from, so you can better help them.

One of our previous blogs broke out 5 simple tips for a retirement income plan. These tips can help your clients feel better prepared for their future and their life in retirement. The tips include knowing your monthly number, making a plan for social security, thinking long-term about taxes, adding another lifetime income stream, and planning for both spouses. It is important to share these tips with your clients and help them begin to think about how they can be more financially secure in retirement.

Resources to help your clients

Nationwide Financial has a variety of resources to help your minority clients build wealth and plan for their future. Below are just a few of these helpful resources.

College Funding Calculator—This tool can help students, parents and other guardians estimate how much money they may need to save to cover higher education expenses.

My Interactive Retirement PlannerSM—Clients can set hypothetical goals and estimate how much to save, taking into account the different factors that can influence retirement outcomes.

FreeWill—Sponsored by Nationwide, this free service allows clients to create a simple will to cover wealth transfer to the next generation.

We have a long way to go to help close the racial wealth gap, but there are many things we can do to continue to make progress. As financial professionals, we can continue to work to build better diversity and inclusion in our organizations, and practice empathy. We can also push our organizations to get involved in different resources that help black financial professionals, such as FARE and Economic Empowerment Day.

Sources and Disclosure

  • 3

    Catalyst: https://www.catalyst.org/research/buying-power/

  • 4

    https://www.moneygeek.com/financial-planning/resources/black-african-american/

  • 5

    NPR article  “A forgotten History of How The U.S. Government Segregated America”. May 2017.

  • 6

    “Financial Planner Use Among Black and Hispanic Households,” K.J. White Jr. and S.J. Heckman, Journal of Financial Planning, Vol. 29, Issue 9 (September 2016), Page 40.

  • 7

    “Race and Trust,” S.S. Smith, Annual Review of Sociology, Vol. 36 (August 2010), pages 453-475.

  • 8

    Ibid.

  • Disclosure: Financial Alliance for Racial Equity is a service mark of Nationwide Mutual Insurance Company © 2021 Nationwide

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