Across every aspect of the retirement industry, from corporate offices to advisory firms to small businesses to the average American worker, it is clear that a myriad of systemic racial issues has put BIPOC (black, indigenous, and people of color) at a disadvantage. I’ve spent the past twenty years in the financial services industry and the past handful building Vestwell, which focuses specifically on bringing retirement savings & investing plans to small and mid-sized businesses. As a company that has the privilege of leveraging the platform on which we stand, it is our moral obligation to do our part to amplify minority voices and break down racial barriers within the industry.
There is much written about the overall lack of long-term savings, with 45% of Baby Boomers having nothing put away for retirement. But when you begin to break down the average retirement savings by race, it becomes clear that BIPOC are deeply and disproportionately affected. In 2016, the median white family had almost $80,000 in retirement savings, while the median black family only had about $30,000 saved. The median retirement savings for Hispanic families was even lower, at only $23,000. Furthermore, in 2018, the median black household earned just 59 cents for every dollar of income the median white household earned.
So, while there are several factors that lead to this discrepancy in retirement savings, including the extreme disparity in average income, there is also the issue of accessibility. Minorities are notably less likely to work for an employer that offers a plan. In fact, “Blacks, Asians, and Latinos are respectively 15, 13, and 42 percent less likely than whites to have access to a job-based retirement plan in the private sector.” People of color are also less likely to have access to a defined benefit plan, with 24% of white households having a pension through a current job versus only 16% of households of people of color.
Vestwell was founded to make quality retirement plans more accessible to everyone. This means not only making plans easier to implement and manage but also making sure that more—if not all—Americans have one. Knowing that BIPOCs often work lower-income jobs and are less likely to have a company-sponsored retirement plan creates both an opportunity and a responsibility for Vestwell. And we plan to do something about it.
Given Vestwell’s position as a 401(k) provider, we feel compelled not only to continue current conversations around racial disparity but also to do more to close the retirement gap, especially for people of color. This starts with education as well as access. If you are a minority-owned business or an advisor to a minority-owned business, we want to make it easier for you to implement a 401(k), including discounts for the plan.
The struggles that are currently being conveyed in the media are not new. But today, this moment has to become a movement…one that does not fade with a news cycle. We ask our industry colleagues and friends to continue to challenge us, educate us, and remind us to do what we can to create true racial equality within the financial services industry and within every fiber of working America.