In August, The Retirement Income Institute published a paper titled “Race/Ethnicity, Saving, and Postretirement Outcomes.” The paper begins by discussing the wealth gap in the U.S., which has consistently shown that non-white households have significantly less wealth than white households. The authors then delve into the factors contributing to these disparities, including income, education, homeownership, and financial behaviors such as saving and investing.
One key finding of the study is that non-white households are less likely to have access to employer-sponsored retirement plans, which can significantly impact their ability to save for the future. The hope is that continued efforts to improve retirement plan coverage may reduce this critical factor in the proliferation of the wealth gap. Many states have now mandated that employers without retirement plans allow participants to save through state-run programs. Additionally, SECURE 1.0 and 2.0 have reduced some friction in developing plans and created tax incentives for employers to establish plans.
Non-white households are more likely to have higher levels of debt, which can also hinder their ability to save. SECURE 2.0 may provide some relief here as well. SECURE 2.0 will allow plans to establish emergency savings provisions within their plans, hopefully reducing the need to use debt in the event of emergencies. Additionally, SECURE 2.0 will enable employers to match student debt repayments as deferrals if employers elect to do so, which could reduce the negative impact of at least student debt on retirement savings accumulations.
The authors also discuss the role discrimination and systemic barriers play in exacerbating the wealth gap. For example, non-white households are more likely to live in neighborhoods with lower property values, which can lead to lower returns on investments in real estate.
The paper highlights the need for policies and programs that address the root causes of the wealth gap and provide greater access to opportunities for wealth accumulation for non-white households. SECURE 2.0 may provide some small ability to affect those gaps. Still, much broader systemic issues will need to be addressed if there is a hope to eliminate the postretirement outcome gap entirely.
SECURE 2.0 provides opportunities, but in many cases, plan sponsors must act to take advantage of those opportunities. We encourage you to evaluate the provisions of SECURE 2.0 to see how it may help improve the retirement security of your employees. If you need help evaluating your options please feel free to contact your Multnomah Group consultant.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice. Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.