Due in large part to low levels of wealth, black households are much less likely than their white counterparts to have substantial retirement savings. And while black wealth has fallen in recent years, access to well-funded defined benefit pension plans could help many hard working African-American families save for retirement.
Through a history of private and public sector discrimination in areas such as housing, education, and employment, African-American families have been unable to accumulate significant wealth. In the aftermath of the Great Recession, black wealth has fallen as many African-American households saw what little wealth they did have – primarily in their homes — disappear with the collapse of the housing market. Predictably, this wealth gap persists into retirement, where three out of four black households have less than $10,000 in retirement savings. Pensions, however, can be part of the solution for African-Americans seeking a secure retirement.
Those who work in the public sector are significantly more likely to have access to a retirement savings plan through their employer than those in the private sector. African-Americans – seeking stable employment and good pay – have been historically more likely to work in the public sector than other groups. As a result, black households are almost as likely to have a defined benefit pension as white households are, and with it, the security of knowing they can retire with dignity. Defined benefit pensions offer a number of advantages to workers, including lower management fees, automatic enrollment, and a lifetime guarantee of retirement benefits.
The United States as a whole is facing a retirement crisis. With the rise in risky and unreliable 401(k)s over the past thirty years, millions of Americans are facing the prospect of trying to retire without sufficient savings. Defined benefit pensions, which do provide a secure and reliable retirement, help many working families – regardless of race — who would otherwise struggle to save for retirement.