Financial planning tools and services to put you on the path to the future you want
Your guide to financial planning and retirement
Connect with peers and experts
Get to know the people behind the company and the mission behind the work
Offer financial wellness to the people at the heart of your business
June 11, 2020
Wealth inequality is real. The disparity effects most of us. However, the black-white wealth gap is staggering.
Wealth inequality is the gap in net worth — your assets minus liabilities — between the wealthy and the poor.
The differences in wealth between the rich and poor in the United States are more pronounced even than income inequality.
Yes, wealth inequality in the United States is breathtaking and getting worse.
Wealth is distributed in a highly unequal fashion, with the wealthiest 1 percent of families in the United States holding about 40 percent of all wealth and the bottom 90 percent of families holding less than one-quarter of all wealth.
In 1989, the bottom 90 percent of the U.S. population held 33 percent of all wealth. By 2016, the bottom 90 percent of the population held only 23 percent of wealth. The wealth share of the top 1 percent increased from about 30 percent to about 40 percent over the same period.
And, the pandemic is hastening the divide further and faster.
You probably know households that are going underwater — restaurant owners and their employees are among those suffering the most since coronavirus started to wreak havoc with the U.S. economy. Your own wealth has probably also taken a hit.
However, did you know that while the vast majority of Americans are suffering, it is estimated that U.S. billionaires have gotten $434 billion richer since the coronavirus pandemic began? This research comes from Americans for Tax Fairness and the Institute for Policy Studies’ Program.
What’s worse, the five wealthiest Americans — Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffett and Larry Elison — saw their combined fortune surge by $75.5 billion, or roughly 19 percent. Together, they represent about 21 percent of the total wealth growth of all 600 billionaires in the last two months.
According to the Brookings Institute, “at $171,000, the net worth of a typical white family is nearly ten times greater than that of a black family ($17,150) in 2016.” And, the numbers are likely worse in 2020. In fact, the Institute for Policy Studies suggests that in 2019, the median white family has $147,000 in net worth, while the median black family stands at $3,600.
The disparity in wealth is also particularly dismal at retirement age. The Urban Institute found that, “In their 30s, whites have an average of $147,000 more in wealth than blacks (three times as much). By their 60s, whites have over $1.1 million more in average wealth than blacks (seven times as much).”
“Median wealth by race is lower. Though the dollar gap grows with age, the ratio doesn’t grow in the same way: whites have seven times more median wealth than blacks in their 60s and 70s.”
These differences in retirement wealth can be the difference between living comfortably and not being able to get by.
So, if you are white and middle class or poor, you are falling farther behind. However, if you are black, you are falling even farther.
The gap in wealth between black and white households can be traced to accumulated inequality and discrimination.
Here are a few factors contributing to the race divide:
It all starts with an uneven playing field. It is important to understand that it is easier to make money when you have money, education and connections.
This simple but powerful video is a powerful illustration of white privilege:
Jim Crow laws were laws that enforced racial segregation after the civil war, with most neighborhoods and facilities for African Americans being subpar. The impact of these laws are still felt today. Separate is not equal.
And, neighborhoods across the United States are still largely separated by race.
Segregation has had a huge and lasting impact on education, employment, healthcare and countless other factors contributing to the economic divide felt by black Americans.
Redlining started in the 1930s. It was a practice once backed by the U.S. government to deny mortgages to people of color in urban neighborhoods.
Because homeownership is one of — if not THE — most powerful way to build wealth, redlining has left significant scars in the black community and is a big contributor to the wealth divide.
Racism exists. Study after study has shown that blacks are hired less frequently, are paid less, arrested and convicted more and suffer other impacts.
And, it is important to point out that researchers have consistently debunked theories that lack of education or experience accounts for blacks being hired less frequently or that increased lawlessness is the determining factor for why blacks are arrested and convicted more often.
Families with increased income and wealth have more advantageous tax treatment than those at the bottom of the wealth divide.
While there are steps that households can undertake to protect themselves and grow wealth, we may need to reshape institutions to improve wealth distribution and help more people and more black people join the middle and upper classes.
Appealing political solutions will depend somewhat on your political orientation. A few of the options for black and all people include:
If you want to grow wealth or help other people grow wealth, here are some tips:
Budgets. Understanding your spending and keeping your spending below your income is a good place to start building wealth.
Education. Getting a college degree helps graduates earn an additional $1 million over their lifetime. College graduates are also less likely to be unemployed.
Personal finance education. Financial IQ is remarkably low in the United States. But, knowing how money works is invaluable.
Avoid debt. Paying interest on anything but a car or home is akin to throwing money out the window. Use debt to help you make more money, not spend more money. If you are carrying debt, get rid of it as quickly as possible.
Buy a home. Buying a home is one of the smartest financial moves anyone can make. Instead of paying rent, you can accumulate home equity — an asset that contributes to your wealth.
Save. Every decision you make benefits either your present self, your future self or both. Saving money is something you do to help your future self. You won’t always be able to make money, but by saving some of what you earn today, you are enabling security and stability for your future.
Invest. Saving is great, but you also need to invest. Because of inflation, cash actually loses value and it certainly doesn’t grow. When you invest, your money is increasing in value (over the long haul, even if you sustain short term losses sometimes.)
Have an emergency fund. It is hard to get out of a financial hole. Having an emergency fund can help you stay ahead of the game.
Have a long term financial (retirement) plan. Planning, assessing and updating your retirement plans should be on your monthly checklist — even after you retire. It is important to check in with your budget and investments and adjust as necessary.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
Share this post:
Our weekly newsletter full of inspiration, podcasts, trends and news.
© 2023 NewRetirement, Inc. All rights reserved.
Disclaimer: The content, calculators, and tools on NewRetirement.com are for informational and educational purposes
only and are not investment advice. They apply financial concepts in a general manner and include
hypotheticals based on information you provide. For retirement planning, you should consider other
assets, income, and investments such as equity in a home or savings accounts in addition to your
retirement savings in an IRA or qualified plan such as a 401(k). Among other things, NewRetirement
provides you with a way to estimate your future retirement income needs and assess the impact of
different scenarios on retirement income. NewRetirement Planner and PlannerPlus are tools that
individuals can use on their own behalf to help think through their future plans, but should not be
acted upon as a complete financial plan. We strongly recommend that you seek the advice of a financial
services professional who has a fiduciary relationship with you before making any type of investment or
significant financial decision. NewRetirement strives to keep its information and tools accurate and up
to date. The information presented is based on objective analysis, but it may not be the same that you
find on a particular financial institution, service provider or specific product's site. All content,
tools, financial products, calculations, estimates, forecasts, comparison shopping products and services
are presented without warranty.