In a new article, Cantrell Dumas, senior researcher for financial regulation and policy at the Joint Center for Political and Economic Studies, discusses the persistent barriers facing the economic security of Black retirees and how new state and federal savings policies will not be enough to close the retirement divide.
Dumas highlights several prior studies documenting the racial economic inequalities facing Black Americans, which compound across the life course and lead to severe Black-White disparities in retirement. According to his research, the typical White household ages 50 to 64 has six times the non-housing wealth of a Black household in the same age group. Among adults over the age of 65, the divide is even wider, with White households holding some $173,000 in non-housing wealth, compared to $18,000 for Black households. Dumas notes that while Social Security provides Black retirees with some economic security (typically at least half of household income), benefits are tied to lifetime earnings and are therefore not enough to erase racial inequality in retirement.
In the coming years, several new state and federal policies have the potential to boost Americans’ savings opportunities. Dumas discusses that some states have implemented state-facilitated retirement programs that allow workers without an employer-sponsored retirement plan to save automatically through payroll deductions. Beginning in the 2027 tax year, the federal Saver’s Match program will provide lower- and middle-income workers with a government contribution of up to $1,000 deposited directly into a retirement account. Additionally, the proposed TrumpIRA.gov platform — if properly implemented — could direct workers to low-cost private IRAs with basic standards for transparency and investment quality.
“Taken together, these policies are likely to increase Black retirement savings,” writes Dumas. “Automatic enrollment makes it easier to start saving. The Saver’s Match adds federal funds to a worker’s contributions. A reliable platform for low-cost IRAs could help workers retain more of their investment returns. But these programs, by themselves, are unlikely to close the Black retirement divide. A worker cannot receive the full match without contributing. Automatic enrollment does not put more money into a paycheck. A low-cost account cannot make up for years of unemployment, low wages, high debt, or the absence of employer contributions. When a household lacks emergency savings, retirement funds may be needed long before retirement.”
To ensure these policies will be beneficial for Black retirement savings, Dumas calls for consistent evaluation of whether Black workers remain enrolled in these programs, as well as if they contribute consistently, receive the eligible federal match, and build balances over time. Additionally, these outcomes should be consistently compared with White workers’ outcomes to analyze any changes to the retirement gap.
“Expanding account access must be paired with policies that strengthen the financial foundation Black workers need to save. That means promoting stable employment and adequate wages, expanding employer retirement contributions, helping households build emergency savings and home equity, and protecting a strong Social Security system,” Dumas writes.
“The goal cannot simply be to give every worker a retirement account. It must be to give every worker a fair chance to build enough financial security to retire with dignity. These new programs can increase Black retirement savings, but they will not close a divide created over a lifetime without broader economic policies that strengthen Black households’ ability to save consistently.”
Dumas is a graduate of the University of South Alabama, where he majored in finance. He holds a law degree from Columbia Law School in New York City.
