Minority Women-A Higher Risk of Poverty

By Michael L. Green

The following article was published by The Women’s Institute for a Secure Retirement (WISER). WISER is an advocacy group which operates the National Resource Center for Women & Retirement. The reason I picked the article is because it highlights the issues of Minority women and retirement and financial literacy and how it affects their abilities to build wealth as well as plan for and enjoy a successful retirement. This article is a two-part installment. The first part appeared in the February 10 th edition of the Star. It discussed work place retirement plans as one of the legs of a three-legged stool of retirement resources and minority women’s low participation rate in them and why. This segment discusses the other two legs of the stool.

Work Place Retirement and Pensions

Plans- The Second Leg of the Stool.

Work Place Retirement Retirement Plans come in the form of Pension which are typically funded and administered by the employer. These are known as defined benefit plans. The other type s ae=re called defined contribution plans. Both the employee and the employer contribute to these plans. The benefit depends on how much the employer and employee contribute and the performance of the investments. Work place retirement Plans are the biggest sources of retirement income after Social Security. Yet less the 50% of all working people are covered by employer retirement plans.

A much smaller percentage of minority women receive retirement income from pension that whit women. In 2018 40% of white women received income from a non-government pension, while 34% of black, 27% of Asian, and 19% of Hispanic women received income from the same source. Overall, less the 40% of all women over age 65 received income from a non-government source.

Although pensions (Defined Benefit Plans) are becoming less prevalent, the are mor likely to be offered with higher paying jobs, offering full time work status or union membership. However studies show that minority workers are less likely to work for an employer offering such benefits and are less likely to participate when they’re offered. Hispanic women workers have a lower participate rate than White and Black women. Lower average wages and lower rates of full-time work account for lower participation rate because those workers have less to contribute. Although women’s participation rates in retirement plans have improved, they remain lower than men.

Nearly 45% of all worker s cash out of their retirement plans when the leave jobs are change employers. A large number of those a are lower wage earners who have smaller balances in their retirement accounts. And too often they don’t consider the financial consequences of cashing out. Taking money out of their retirement plan before age 59 ½ is costly. First the worker could be subject to income taxes and an additional 10% penalty. Second, in cashing out they forego years of future growth that would have come had they left the money invested. The loss of that compound growth over 10 years or longer can be significant. Research shows that gender race and Hispanic origin are factors for cashing out. As many as 75% of Hispanic cash out compared to 38% for White women and 23% for Black women.

Individual Savings and InvestmentsThe Third Leg of the Stool Saving in addition employer pension is important for anybody but especially women. But it remains difficult for women and particular minority women to benefit from saving and investments.

Lower Earnings. Black and Hispanic women report that lower earnings leave them with few resources to invest. The US Census Bureau found that women have lower earnings over their work lives and Black and Hispanics in particular earn less over their lifetimes. With lower earnings, women have less opportunity to save.

Unbanked or Underbanked: Almost 9 million households are un banked. That is they do not have a bank account and use other financial services such check cashing services, payday loans, and money orders. Additionally, it is estimated that 21 million households are “underbanked. This means that the have a checking or savings account but rely on other financial services in their daily lives. Of the unbanked and underbanked, minorities are prominent. In Black households, 1 in 5 are unbanked and 1 in 3 are underbanked. In Hispanics household, 1 in 6 are unbanked and 3 in 10 are underbanked. The reasons cited are high costs and excessive fees required to maintain minimum balances at banks. There is also a general lack of trust of community banking services.

Financial Literacy: It is well known that financial literacy can play a big role in retirement planning and financial planning. Even though efforts to promote financial literacy have increased, most American have not improved their financial knowledge or taken advantage of the resources available to do so. It is greatly underappreciated as a fundamental tool to navigate life. •

“You’ve worked hard for your money, make it work for you.”

WOMEN’S LOOKS

By Haberdash

This month our column will be dedicated to the ladies, and first up is the “Clothes Horse“ and “Style Maven” herself… Maria Beltre aka @LooseUnicorns. She’s a master at “range”. Giving lessons in more Fall/Winter looks than a little bit. SALUTE!

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