This article looks into what retirement & pensions look like for the USA and for black people in particular. Skip half way down if you just want the race-based statistics but not the overall picture.
Jim Crow laws and US-style racial segregation mean black people in America as a whole are still catching up with wealth accumulation.
This article brings together data and charts from various sources; references to all sources are listed at the bottom.
Overall, retirement statistics show a dim picture for everyone except the very affluent in America and the situation is worse for black and hispanic populations.
One factor that fascinates me is that the US doesn't have a national state pension system. This means old people have to claim social security benefits to get by.
This is important because in the UK and other developed economies you get the state pension based on your tax contribution history, it's essentially a prize for working hard during your life and whether you've got millions in the bank or not, you're entitled. You can even claim your state pension if you are still working when you reach retirement age.
In the US, you have to claim social security in old age in the same way you would if you were unemployed. There is no State reward for having been a long-standing tax payer when you reach retirement age in the US.
RETIREMENT STATISTICS FOR THE US OVERALL
Whilst the graphic below shows that the US is one of the best places for social connections and mental well being in old age, it is the third worst country in the list for old age poverty.
Only Australia and Japan are worse, even India a country far behind the US in development has better relative poverty in old age.
What proportion of an old person's income does this form?
RETIREMENT AND WEALTH FOR AFRICAN AMERICANS
"In 1983, the median white family had more than $100,000 in wealth, compared to less than $13,000 for African-American families—an eight-fold difference." (newrepublic.com) By 2013, 30 years later whites were 34% wealthier with $134k whilst black people were poorer with only $11k in wealth.
Hispanics were in exactly the same situation as the graph on the right shows.
Wealth by Race
White Americans earn a lot more, on average, than black Americans such that by age 61 the average white person had earned $2 million over their life and the average black person $1.5 million, Hispanics were worse off with $1 million in earnings by age 61.
Obviously, the more you earn the more you can save, earn interest and invest.
Liquid Retirement Savings
Liquid retirement savings are cash saved for retirement e.g. as a 401k.
In 2013, the average white family had $130k in liquid retirement savings, for blacks this was $19k and only $13k for hispanics.
BUT - the situation is actually worse than that, a few very rich people skew up the average number especially for whites. If you use the median, i.e. the middle person, whites only have $5k in retirement savings, blacks and Hispanics have zero.
Homeownership is one of the key ways people around the world build wealth.
The homeownership rate amongst black Americans (43%) is 60% lower than amongst whites (69%). For a very long time black Americans were locked out of property ownership because of discriminatory laws and even now, property prices are lower in black areas than in white areas and price growth is slower (Forbes).
Debts reduce people's ability to save.
Black Americans have higher levels of student debt, 42%, compared to 28% for whites and 16% for Hispanics. Ultimately this would be a good thing if it was leading to higher future incomes but black people also have lower graduation rates.
This means some people get saddled with debt and don't get a degree at the end of it to boost future income.
The lower student debt amongst whites could be because more of them have parental support in paying for tuition and living costs.
Keep in mind as you read the above that not all minorities are reflected in the statistics. The Jewish community and Asians tend to have better rates of saving, wealth accumulation and lower overall poverty than whites, blacks and Hispanics.
Closing the gap in property ownership will definitely be one of the key ways black people in America will boost the retirement asset base and wealth in general. Please take a look at my property toolkit for information on how to grow a portfolio.
You might also like:
Old Age Life, Pensions And Poverty In The UK
Which are the best countries in the world to grow old in? (The Guardian)
How Home Ownership Keeps Blacks Poorer Than Whites (Forbes)
The Alarming Retirement Crisis Facing Minorities in America (newrepublic.com)
Why you may retire in poverty (reuters)
Lots of scary statistics get thrown around regarding the negative retirement prospects for current 30-somethings (and even worse for those younger than us), so this week I’ve decided to dig deep. I’ll write a series of 3 articles on retirement: what do that the stats look like in the UK and the US and ultimately, what will it cost you to retire?
I will not do an article on retirement stats in Africa because for the most part those statistics are VERY hard to come by. However, I found a fantastical article by the OECD that looks at Pensions In Africa.
This is what I assume we all want to know:
When Do You Get A UK State Pension?
The retirement age used to be 60 for men and 65 for women. It’s now been equalized to 65 for both. It’s moving up to 66 by 2020, 67 by 2028 and 68 by 2046.
I’ll qualify to get a UK state pension at the age 68 in 2051 provided I’ve paid national insurance (NI) taxes or have NI Credits. You can calculate your own pension age here.
What does this mean?
Those of us that reach retirement age after 6 April 2010 need to have 30 “qualifying years” to get the maximum state pension and at least 10 qualifying years to get anything at all.
If you don’t have a National Insurance record before 6 April 2016 you’ll need 35 qualifying years. Qualifying years are years in which:
For instance, if you work abroad or aren’t working for any reason you can pay voluntary contributions to ensure you qualify for a full state pension. I see this as a sort of backup insurance policy and I would definitely do it if I was working abroad.
“If you reached the pension age before April 2010, then a woman normally needed 39 qualifying years, and a man needed 44 qualifying years during a regular working life to get the full state pension.” BBC
What’s The Amount of The UK State Pension?
If you are retiring on or after 6 April 2016 the full state pension you can get is £155.65/week, this is £8,094/year or £675/month.
This amount is guaranteed by the government to rise by the higher of:
But, of course, government plans do change and this guarantee could fall away if the UK hits problems. There is a lot of press surrounding this possibility right now.
How Much Does The Average Pensioner Actually Have In The UK?
People retiring in 2016 expected income of £17,700 per annum according to a Prudential survey. They carry out this survey annually and the table below shows the results.
This number is actually £1,000 lower than in 2008 but it’s been making a steady recovery:
What Do The Pension Savings of Workers In The UK Look Like?
According to Partnership the average UK pension pot stood at £87,724 in 2015. There is a lot of variance within the UK, with Essex having the highest pension pots, £125,478, and Shropshire the lowest, £44,336. Check out where your region stands using the image below.
With compulsory workplace pensions now in effect pension savings should hopefully rise for a good majority of people.
What Proportion Of Pensioners Own Their Home Outright?
Property ownership is one of the key determinants of financial independence in old age.
Here are stats from the 2011 census carried out by the Office of National Statistics:
The obvious advantage of outright home ownership when you are retired is that you save yourself what is usually a household’s biggest expense.
Home ownership is almost necessary to guarantee a comfortable retirement because state pensions rules are changing all the time.
Personally, I hope for the best when it comes to state pensions but I certainly won’t depend on the government to look after me in old age.
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Basic State Pension Overview (gov.uk)
State Pension Eligibility (gov.uk)
State pension: The overhaul and you
The pension pot map of the UK revealed
Retirees in 2016 expect income of nearly £18k a year
Home ownership and renting in England and Wales
Number of UK working-age households drops for first time
Pensions In Africa
Have you ever felt tired? Like really, really tired? Like so tired you just want to shut the world out and chill out on your own? Yes? I’m pretty sure it happens to most people at some point in their life and that’s how I found myself feeling late in 2015.
Chester, my little boy, was not even one yet and I was trying to do so much – be a great mum and run a business. I kept myself so busy that I was working again pretty much two days after giving birth. I didn’t feel I deserved a total break so I worked whenever Chester was sleeping and I also got a nanny to come round for 10 hours a week from when he was about 8 weeks old.
Anyway, I won’t bore you with the ins and outs of my childcare routine all I’ll say is you can only do so much before your body says stop, NOW!
In addition to my Virtual Assistant (VA) who works 20 hours a week, I tried to hire a couple of people but it didn’t work out so at the end of January I thought, you know what, I’m going to retire. I’ll let my VA do what she normally does and I’ll do almost no work until I start to feel like it again and so that’s what I did.
My YouTube followers will attest to the fact that I’ve only uploaded one video in three months when I used to have 3 or 4 videos up every single week.
I’m only 32 so you might wonder why I’d want to retire and why I’m even calling it retirement instead of say, unemployment or perhaps housewife or my favourite term for it, homemaker – you’ve got to love the Americans…well…
I’m still employed as the business pays my salary every month and my Amazon sales are still rolling in day-in-day-out so I’m not unemployed. Chester still goes to nursery part-time so I’m not a full-time mum either. Finally, we have a weekly cleaner so I don’t spend much time making the home either.
What inspired me to retire?
Besides feeling constantly exhausted, I’ve always loved Tim Ferriss’s notion of interspersing retirement throughout life rather than working towards one huge break at the end.
There are after all no guarantees regarding when that end might come nor even whether you’ll be in good enough health to enjoy it.
Given my business runs using Amazon fulfilment which means my sales are immediately dispatched by Amazon without my input and my virtual assistant does a lot for me it is possible to reduce my work hours to almost nothing so I thought, let’s do it; now would be a great time for a mini-retirment.
So, what does a retired 32 year old do with their time?
I came to this dilemma the moment I decided to retire and the first answer was I’m going to watch TV in the evenings, lots and lots of it. So I swapped editing videos every evening for watching TV plus 30 minutes to an hour of reading. I’m currently working my way through a novel by Val McDermid.
I’ve missed reading fiction. I’ve always loved crime fiction and it’s taken a back seat since I started running the business back in 2012.
I then decided to sign up to a mortgage course because our property portfolio is growing and there’s nothing like knowledge to get you ahead in that game. I’m still building the property portfolio and the legal and tax framework surrounding mortgages is getting ever more complex so this will surely help. Mind you, even fully-fledged accountants sometimes feel as though they’re guessing.
I’ve additionally taken up an upholstery course because I’ve always been interested in upholstery.
Incidentally, at about the time I officially retired (end of January 2016), Harry and I put in an offer for a house and I worked on the purchase and refurbishment of the house.
It took all of April and £32,000 ($50,000) to get the house up to my standard, video coming up, and having loved that experience I’m definitely looking to do more of it. This purchase brings the portfolio up to 6 houses.
I've recently started jogging again too and within less than two weeks my BP was back down to all-time lows. It had been elevated for almost 2 years
How long do I plan to stay retired for?
All of 2016 and probably most of 2017. Ultimately, I’ve said I’ll literally only do things that a) I really, really want to share and b) that take no more than 10 to 15 hours of effort per week on my part. No work will happen in the evenings and nothing at weekends.
I’ve had a few people email me to ask for one-on-one coaching and I’m considering taking on a handful of people or so because I do enjoy getting into a person’s financial situation and sorting it out.
For me, work is a habit and I do find myself forcing my body not to work at times so I’m sure I’ll do some odd filing and edit the odd video at night. That said, taking a rest like this is AWE-SOME. It works because of the type of business I run but with technology this is the type of thing many people in the future will be able to do. To be honest, I don’t know why it isn’t the done thing.
Everyone should take a year or at least 6 months out every decade just to enjoy life a little more. You deserve it.
The only downside is that with so little input my business is unlikely to earn 6-figures as it has for the last two years but it's earning enough to keep the bills paid and I'm fine with that.
Ultimately, for me, retirement has been about doing more hobby-like activities and being less obsessed with productivity. Oh yeah, and doing more exercise.
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Heather on Wealth
I enjoy helping people think through their personal finances and blog about that here. Join my personal finance community at The Money Spot™.