Almost everyone in the United States is behind in saving and planning for retirement. However, retirement savings and racial inequality is a real thing.
- Saving for retirement takes work
- Economic issues are central to civil rights
Putting Money Aside
Building wealth for yourself is the American Dream, often including owning a home and a car, in an area with great schools. But if you can’t break out of a poverty cycle, it’s impossible to realize this dream and make it a reality. The coronavirus pandemic has seriously jolted retirement savings for many Americans, especially minorities, who are least likely to have savings in the first place. Having to borrow money from a retirement account in 2020 was made easier by the CARES Act but was still limited to a percentage of the amount of money you already had saved. If you had no savings, you couldn’t borrow against anything.
Poverty Cycles and Retirement
Growing up poor has a host of negative consequences associated with it. And BIPOC (Black, Indigenous, People of Color) minorities in the United States grow up in poverty at a higher percentage rate than non-minorities. In addition to the possible physical effects of not being able to purchase and consume the most nutritious foods, there are other results as well.
BIPOC in poverty lack access to food, schools and housing in unfortunately large numbers. But even after childhood, those who are born into poverty tend to lack access to higher education, better jobs, and financial security, and are more likely to end up poor as adults. This means retirement can be out of reach along with other traditional markers of wealth, like owning a home.
Saving For Retirement
So how does saving help? Saving for retirement is a great way to build wealth for the long term. Saving as little as $3 a day can help you earn enough, through compound interest and deferment to buy a home, pay for college, or retirement. But there is a lack of generational knowledge to overcome, as well as other concerns.
Start as early as possible.
Many jobs offer to take money out automatically to invest in a 401(k). But even for those in business for themselves or in jobs that don’t offer forced savings, anyone can start an IRA. If a summer job at age 16 is for college money, a little can be put into an account, or invested for the long term. Lived experiences help people to learn more about themselves and others outside their traditional scope.
Consistency is key.
If you save $100 per month, whether as a solopreneur in a Solo 401(k) or in a Roth IRA, even with no additional income from compound interest, you would have $1200 saved in a year, $12,000 in ten years, and so on. This would make retirement that much easier, particularly where retired adults can take care of themselves and plan how they would like their retirement to go. Or, savings can be used to purchase a home, or to pay for a college or advanced degree.
Patience is paramount.
If you’re looking to save enough money in a Roth IRA to buy a home, you can consistently invest, and patiently watch your money grow. Savings for your children’s college career can be a driving goal as well. As more people get college degrees, more jobs are requiring them. And if college is not in the cards, trade schools can help your kids work toward an apprenticeship and career that way.
Bridging the Divide
We’re not going to solve systemic racism and its ills overnight. But with access to better neighborhoods, better schools, and a better way of life, BIPOC minorities can help themselves while helping future generations, and helping to break a cycle of poverty.
And, by saving for retirement or large purchases that can improve your life, putting aside money can help everyone. Whether saving for a home in a better area, with great schools and organizations you support, or putting money away for yourself or your children to attend trade school or college, so that you or they can get a better career and work your way up the ladder, saving for retirement is just one simple way to get started.