obstacles for retirement for low-income savers

THE COLOR OF RETIREMENT INSECURITY:UNPACKING THE ROLE OF RACIAL DISPARITIES IN INCOME, WEALTH, AND HEALTHDr. Maya Rockeymoore | June 2016National Press Foundation

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The Center for Global Policy Solutions is a social change nonprofit dedicated to making policy work for people and their environments by advancing innovative and effective solutions to our world’s most critical challenges.

MISSION VISION

The Center for Global Policy Solutions envisions a vibrant, diverse, and inclusive world in which everyone has the opportunity to achieve health, wealth, educational, and civic success in safe and sustainable environments.

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• Currently, 38 million working age households (45% of the US workforce) do not have retirement account savings of any kind (Rhee, 2013).

• Fifty seven percent of private sector workers do not have access to a tax preferred, employer-sponsored retirement savings plan of any kind (Rhee, 2013).

• Of private sector workers who do have access and participate in a retirement plan, a substantial majority (69%) had only a defined contribution, or 401k-style, plan while a diminishing few (7%) had access to only a defined benefit, or traditional pension, plan (Employee Benefit Research Institute, 2011).

• The biggest reason for this gap is that access to employer-sponsored retirement accounts varies by industry sector, occupation, size of employer, and whether the job has union coverage (Hiltonsmith, 2010).

• Already economically disadvantaged groups—such as people of color and low- income workers—are the least likely to have any other form of retirement savings outside of Social Security (Hiltonsmith, 2010).

U.S. Retirement Crisis

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Median Net Worth by Race/Ethnicity

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Source: Economic Policy Institute http://stateofworkingamerica.org/charts/homeownership-rates-by-race-1975-2009/

Private Sector Participants in an Employment Based Retirement Plan by Plan Type, 1979-2011 (among those

with a plan) Source: EBRI, 2014

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Life Expectancy At Birth By Race and Ethnicity(Source: National Vital Statistics May 2011 and U.S. Census Projections)


Better and More Jobs

Major infrastructure investment

Federal jobs guarantee

Make work pay and pay workers fairly

Fair Financial Services

Expand access to low- and no-cost financial services

Require investment advisors and brokers to put needs of client first

Implement alternative credit models rather than exclusive use of FICO scores

RECOMMENDATIONS

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Improve Housing Policy

Ensure mortgage relief programs are transparent and fair

Allow Freddie Mac and Fannie Mae to perform principal reduction and loan modifications for distressed homeowners

Encourage shared-equity loans between private investors and struggling or first-time homeowners

Expand Entrepreneurship

Provide target entrepreneurship training and assistance through school and community-based career and technical education

Modernize the Community Reinvestment Act (CRA) to include business lending and investment services

Improve data-tracking to measure impact at Minority Business Development Centers

RECOMMENDATIONS

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More Investment in Kids

Enact a universal, progressive “baby bond” trust program for every American child

Implement universal pre-K

Provide equitable education resources in K-12

Expand student debt forgiveness programs

Curb tuition and fee increases at universities

Make Tax Policy Fair

Make refundable tax credit expansions permanent and increase the EITC for childless workers

Create a renters tax credit

Develop a first-time homeowner’s tax credit scaled to income

Expand the Savers Tax Credit to include savings applied to a liquid account

Improve the overall fairness of the tax code

RECOMMENDATIONS

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Retirement Security for All

Expand Social Security

Protect public defined benefit plans

Establish universal retirement savings accounts with a federal match

Target New Investments to Low-Wealth Households

Target 10% of new investments towards 20% of population that has lived in poverty for more than 30 years

When crafting universal policies, use levers to target resources communities with low wealth

RECOMMENDATIONS

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• Strengthen and Modernize Social Security• Maintain What Works• Increase Access• Improve Economic Security for Vulnerable

Populations• Achieve Intergenerational Equity• Ensure Long Term Solvency and Adequacy

Principles for Strengthening Social Securitywww.ModernizeSocialSecurity.org

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Why Not Raise the Retirement Age?

• Raising the retirement age to 69 would result in about a 14-percent reduction in monthly Social Security benefits, on average.

• Life expectancy is increasing for people in the upper half of the income distribution while it has stalled for the bottom half.

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Making policy work for people and their environments.

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obstacles for retirement for low-income savers

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