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IRA Financial Blog

Retirement System and the Racial Wealth Divide – Episode 234

Adam Talks

IRA Financial’s Adam Bergman discusses the racial wealth divide in America and how all Americans can save for retirement, regardless of race, religion or beliefs.

On top of the COVID-19 pandemic, America witnessed the death of George Floyd. This has led to an increase in tensions among our citizens. Without getting political, Mr. Bergman wanted to show how the US retirement system can curb the racial wealth divide. The only color that matters is green, as in the money anyone can save for his or her retirement. As long as you earn money, you can put aside money for retirement.

How the Retirement System Works

As with anything involving fiances, it all comes down to choices (and a lot of patience). Choosing how how much to save, where to save it and what to invest in are all equally important. Obviously, the more you put aside for retirement, the better off you will be. However, not everyone can afford to save 10-15% of his or her income. But, that doesn’t matter in the end. It’s all about putting aside as much as you can. The racial wealth divide in this country is huge. Surprisingly though, it’s not that huge when you look at the number of people on welfare and food stamps. White people are just as likely to use these programs as other minorities.

Again, your skin color does not determine how well you succeed or not. Your determination, drive and understanding will lead you down the right path. We think where the retirement system fails is on the education front. Not enough lower-income Americans know how it works. Saving just a little bit each week or month can lead to real wealth later on in life. The earlier you get started, the better off you will be in the long run.

The IRS has put all the tools in place to allow anyone to retire while they still enjoy life. Through the power of tax-deferral and compounding interest, your savings increase at a much faster pace than keeping it in the bank or under your mattress. It boils down to simple (or sometimes complicated) math. One thing is for certain, if you don’t use an IRA or 401(k) plan to save, you are not reaping the benefits of the retirement system

Anyone Can Save

You will not see a racial divide when it comes to saving for retirement. All one needs is earned income (generally, pay from a job) to save in a 401(k) or IRA. You don’t need to be a financial genius to save. Heck, you don’t even need to know how the stock markets work. What you should be aware of is what happens with your money when you invest your retirement funds. Typically, this will be through a 401(k) plan at your job. If one if not offered, you can take matters into your own hands and start an Individual Retirement Account, or IRA. Either way, they are both tax-advantaged ways to save for retirement.

You can choose how much you want to put away each paycheck towards your future. It doesn’t matter if it’s $5, $50 or $500. Anything is better than $0! If you are not financially savvy or can’t afford a financial planner, there are some basic investments you can opt for. These include different types or mutual funds and target date funds. Your money will be allocated across several sectors of the investment world. When your investments make money, so do you!


On average, the Stock Market will yield about a 7% return. Simple math shows that for every $100 invested, you will make $7. And, unlike your paycheck, you will not get taxed on this money every year. You only pay taxes when you withdrawn funds during retirement. This is the power of tax-deferral. Since no taxes are taken out, your money gets to grow unhindered for decades.

The important factor is compounding interest. If you earn that same 7% every year, you can more bang for you buck each year. Again, that $100 will be worth $107 at the end of the year. If you earn that same 7% the next year, you will earn $7.49 ($107 x 7%). You now have $114.49. It might not seem like a big boost, but the boost gets bigger every year. Therefore, the more you can contribute and the longer it has to grow, the better off you are.

What Can We Learn?

Unlike many people in this country, the retirement system doesn’t care what you look like. No one will judge you based on your account balance. We can look at someone who has taken the time to put a little something away and say “Great job, let’s see how you can do even better!” If all Americans had this attitude, the country would be in a better place than it is now. We are all equal and should be treated as such. Just because someone doesn’t have the nicest clothes or eat at the fanciest restaurants, doesn’t mean he or she is any less than you or I.

Take a cue from the retirement system and not let the racial wealth divide continue to grow. Don’t let a person’s race, religion or beliefs make you look upon them differently. Everyone should be afforded the right to live his or her life the way he or she wants, without repercussions based on those factors. Here at IRA Financial, we strive to treat all clients prospective clients with the same humanity, integrity and respect that we would want ourselves. If everyone were to do this, we can all succeed in this crazy world!

Thanks for listening and hope you enjoyed the latest Adam Talks podcast. Be sure to check out our SoundCloud page for lots of important podcasts!


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