Bennington, Vermont News
Racial Wealth Gap Affects Retirement Savings for Workers of Color in Vermont
The racial wealth gap is widening as many workers of color go without retirement savings. The median wealth gap between Black and Hispanic families and white families expanded by about $50,000 between 2019 and 2022, according to research from The…
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The widening racial wealth gap is increasingly affecting retirement savings among workers of color, an issue that resonates in Bennington and surrounding areas. According to research from The Pew Charitable Trusts, the median wealth disparity between Black and Hispanic families and their white counterparts grew by approximately $50,000 from 2019 to 2022.
Understanding the Wealth Gap
In 2022, typical white families had $240,000 more wealth than Black families and $223,000 more than Hispanic families. This significant gap is largely attributed to differences in retirement savings, as white families generally save more for retirement than other racial and ethnic groups.
Efforts to Bridge the Gap
To address this issue, Pew advocates for state and city-sponsored automatic retirement programs aimed at the more than 50 million Americans lacking retirement plans through their employers. These programs, known as automatic Individual Retirement Accounts (IRAs), have recently gained traction, with over 1.2 million workers in 15 states collectively saving $3 billion through such plans.
Local Impact and Participation
- States like Minnesota have launched auto-IRA programs targeting employers with five or more employees.
- Other states, including Hawaii and Washington, are set to initiate similar programs soon.
John Scott, director of Pew’s retirement savings project, noted that these programs are beneficial for lower-income workers, many of whom are Black and Hispanic. “These programs are doing what they’re supposed to do, which is really reaching those workers who have their access to retirement benefits cut off just by virtue of where they work,” Scott stated.
Automatic Enrollment and Flexibility
Auto-IRAs require most employers without retirement offerings to implement payroll deductions, automatically enrolling employees who can opt out. This leads to higher participation rates compared to traditional opt-in programs. Contributions often come from post-tax earnings, allowing workers more flexibility in managing their finances.
Reframing Wealth and Security
Pew’s online discussions with diverse workers revealed that many view wealth not just as assets, but as financial security. Scott emphasized that for many, having certainty about income and expenses is more critical than simply accumulating wealth. “We need to help them build that resilience for the short term,” he said.
As these automatic retirement programs expand, they present a promising avenue for addressing the racial wealth gap and enhancing retirement savings for all workers in our community.
What’s Next?
Local residents are encouraged to stay informed about these developments and consider how such retirement programs could impact their financial planning.
Based on reporting originally published by Stateline. Read the original story.
