Mass retirement accounts. Residents can improve racial wealth gap, report finds – The Boston Globe

“What the research reveals is that retirement assets are really a much bigger piece of the wealth puzzle than most people appreciate,” Schuster said.

According to the report, 61 percent of white households have a retirement plan in their current job, compared to 52 percent of black households and 34 percent of Hispanic households.

While white and Asian workers in Massachusetts own greater 401(k) assets than their black and Hispanic peers, gaps are smaller than disparities in other assets such as home ownership, and they can serve as a key lever to bridge the racial wealth gap and bring more families in the middle class.

Nationally, retirement plan assets account for 41 percent of all private assets among black households headed between the ages of 40 and 64, according to the report.

A key reason is that black workers are more likely than their white and Hispanic counterparts to be employed in public sector jobs that offer high-quality pensions.

Those roles are too often associated with union work, although such opportunities for wealth creation are less common now and have been declining since the 1980s as employers move away from defined benefit pension plans and into defined contribution plans where employees pay with the support of the employer. These plans may be more volatile depending on market conditions.

Workers who have neither option face instability as they grow older.

“People who don’t have good retirement security end up having to put together such a wide range of strategies to survive and make ends meet,” Schuster said.

Many end up working longer before they can afford to retire. In other cases, older adults move in with their grown children – but this can have a ripple effect on some families like the second generation then spends more of their money on taking care of the family than on building their own retirement safety net.

“If you simply don’t have enough disposable income outside of your monthly paycheck, you’re going to be much less likely to be able to open a separate, private IRA account,” Schuster said. .

In recent years, there have been local efforts to create a state-run pension program that would provide all workers with a 401(k), but they have been unsuccessful.

Nationally, Representative Richard Neal i Massachusetts has introduced the Automatic IRA Act of 2024 that would create an individual retirement account for gig workers and other independent contractors.

The bill would require organizations with more than 10 employees to automatically enroll workers in a retirement plan if the organization doesn’t already offer one.

Schuster said the research points to others small changes that can help improve the retirement gap, such as creating payroll systems that automatically enrolls workers in a retirement plan, as opposed to relying on workers to proactively enroll.

Default contribution levels can also be set so that workers after a certain age contribute more of their wages to their plans. according to the report.

This story was produced by the Globe’s Money, Power, Inequality team, which closes the racial wealth gap in Greater Boston. You can sign up for the newsletter here.

Esmy Jimenez can be reached at esmy.jimenez@globe.com. Follow him @esmyjimenez.