When should you start planning for retirement?

“The best time to start planning for retirement is as early as possible,” says Rahel Cook, assistant vice president at U.S. Bank Private Wealth Management. “By the time you’re in your 40s, you should have a clearer picture of your financial situation.”

Dr. Dana Palma, financial advisor at Edward Jones, believes there is no ideal age and that a first job as a teenager can be the start of retirement planning or, at any adult age, if planning was delayed.

Both suggest taking advantage of retirement accounts like 401(k)s and IRAs, regularly assessing retirement goals and making any needed adjustments with the help of an experienced and trusted advisor.

How much money do you need for retirement?

Shemira Fermon, regional leader at Primerica Financial Services, says you need at least $2 million to retire with basic financial security.

“You’ve got to factor in inflation, but $2 million is still going to be minimum wage in 20-30 years from now. If you plan to live in the United States, understand that is going to be the equivalent of middle income.”

Fermon believes Black women should be open to moving outside the U.S. to live their retirement dreams with greater financial security.

How do you save for retirement with a low income?

For those on a tight budget, Palma suggests starting with two percent or the minimum contribution to a company 401(k) and increasing it by one percent every six months or whenever possible.

“Even if you are still living paycheck to paycheck, make sure your employer is matching because if they are matching and you’re not putting any money in, you’re leaving money on the table.”

She says creating new habits of regularly putting money aside for the future is important.

How can planning for retirement be different for Black women?

Planning for retirement for Black women can come with unique challenges and considerations compared to other demographics, explains Cook.

Studies show that Black women earn less than their white counterparts and Black men, which can make budgeting and saving a greater priority.  

“Black women may need to prepare for a longer retirement period. This requires careful budgeting and investment strategies to ensure that savings last throughout their lifetime.”

Cook says it’s crucial for Black women to approach retirement planning with a tailored and proactive strategy.

What are common retirement vehicles that Black women can consider?

“The most common and sought-after retirement income includes a mix of savings, 401(k), IRAs, a business or home,” says Cook. “For many Black women, several of these streams of income may not be an option in their retirement strategies.”

Palma understands that Black women may not be able to rely on generational wealth or inheritance but can use insurance to lessen the financial burdens of future generations. 

“If you at least have a life insurance policy, then that’s one way to make sure you are bringing money over and your child(ren) will have some money – that’s another way of creating generational wealth.”

Cook suggests that Black women maximize the streams of income they can access and work with an advisor to assess risk tolerance and find the right mix of stocks, bonds and cash. Other options to explore may be Money Market accounts and Certificates of Deposits (CDs).

Palma recommends a Health Savings Account (HSA), a type of personal savings account that can be used to pay various healthcare costs. Those with an employer should check to see if they are offered.

“The greatest thing about an HSA plan is if you keep putting money in there and wait until age 65, that is another retirement savings account.”

How can an advisor help?

All experts advise having a single point of contact to assess current financial status goals and devise a tailored plan based on needs and vision for retirement.

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“I started speaking it out loud that I was going to retire early, way before I ever believed it. Then I started putting this plan together, and basically, I lived off half my income or less, quit making debt, paid off all my bad debt and started investing.”

Her investments were a mix of stocks, a 401(k), a few Roth IRAs and stock trading. She also brought in extra money by investing in real estate properties with her best friend and a few of her own.

“My tenants are literally paying the majority of my mortgage, which allows me not to work full time.”

Being at home has given her the opportunity to spend more time with her son.

“I love being at home. I love being able to cook at Noon. I love being able to go to the grocery store in the morning. I love making all of his events.”

While she’s not a certified financial planner, she is now a content creator sharing her journey and helping others plan for early retirement. She says there are three things you must do to retire early.

Change your mindset

“If your mindset hasn’t changed to say, ‘money is a tool, and I am not scared of it’, then none of the rest will work.” She tells her followers to start being better managers of money and learn to budget.

Honor God with your money

“Ever since I started honoring God with my money and being a giver in general, I have not had financial lack.”

Put a plan together

“Figure out where you are now and where you want to be in one year, five years, ten years or however you want to do it.”

Another piece of advice McKenney shares, and one she did not plan for is ensuring you calculate inflation into your financial needs.

“I’m like, ‘Dang Lord, things are expensive!’”

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Among Black households, 31 percent are led by a Black woman, according to Pew Research. As the head of household, Black women are responsible for investing in their family’s future and planning for retirement. However, some find themselves ill-equipped for this task. Experts say the first step in breaking generational financial barriers is through conversation.

Dr. Dana Palma, a financial advisor with Edward Jones, believes financial literacy is key for Black families. She says it’s never too early or late to begin talking about money and retirement. One obstacle she feels Black women face is that money is often a taboo subject amongst Black families.

“For our generation, we were never taught about finances. It’s not something that was ever discussed around the dinner table.”

Palma changed that when she became a mother and started teaching her son, now 18, about financial literacy from a young age.

“At age seven, I talked about stocks, and he actually started investing at age seven, and we kind of make that part of our discussions.”

When he began working at age 16, he opened a Roth IRA. They chose this vehicle instead of a traditional savings account because it’s tax-free money and, unlike a 401(k) that can’t start until age 21, this allowed him to save for his retirement and future big purchases, such as a property when he is a first-time home buyer.

Shemira Fermon, a regional leader at Primerica Financial Services, also recommends Roth IRAs to her clients, especially those who are self-employed. Although she advises others about their retirement, she wasn’t always financially literate or prepared. A trip to the store at age 20 changed her life and her ideas about finances after a chance meeting with a stranger in the aisle who happened to be in the insurance business. They met formally, and not only did she leave with a life insurance policy, but also a retirement strategy and a new career.

“I had a retirement plan with my job, but I’d moved from one job to another, and I really didn’t understand it, so she helped me understand it.”

She realized that part of a successful retirement strategy and a key component to creating generational wealth involved a solid life insurance policy. However, it was her experience that money was not a discussion point in her family or friend circle.

Her neighborhood reflected the silence around money and planning with no financial advisory offices unlike more affluent areas. This realization motivated her to get an insurance license and learn about investments so she could help her community.

“It just became a passion. I started talking to people I knew because we need to start having these discussions.”

She found some had life insurance policies, but they were predatory in nature or had exclusions or fine print that weren’t explained at the start of the policy.

Fermon recommends going over every policy, no matter how old, with a professional advisor or the insurance company to ensure the coverage is clear. 

“I have a 20-year-old client who had a Gerber policy that her mom had on her since she was a kid. She went to pull money out of it, and they told her she could take out $1,200.”  Fermon went over the policy and found that after 15 years, the policy was only worth $2,000.

Many Black women are trying to invest in themselves and their families’ futures, but need help understanding what vehicles work best for them. In her experience, Fermon explains that Black women are more prepared for retirement than Black men.

“Typically speaking, Black women are used to doing everything. They’re working, they’re paying the bills, so they know what money is left and what’s not left. “

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Freddie Davis-English, a retired government administrator from Minneapolis, was sought after for her previous accomplishments and propelled into a new career in the non-profit sector. While her retirement investments, pension and Social Security were able to afford the retirement she’d envisioned for herself, she was open to professional growth and the opportunity to help others.

Davis-English was more financially prepared for her retirement than she thought. A forgotten supplemental retirement policy in the high 5-figures gave her financial assets a boost.

“It was a welcomed surprise when I retired because there was a time when they wanted to get rid of it as a cost-saving measure. An older co-worker talked me into keeping it instead of cashing it in.”

She was able to use the money from the supplemental insurance policy to pay for her daughter’s wedding and many other milestone occasions without tapping into her pension and additional retirement savings. Even without working post-retirement, she was able to thrive off the retirement assets she’d accumulated. When you add her husband’s retirement assets to the mix, their lifestyle is equal to their pre-retirement income.

However, Davis-English is the exception, not the rule.

Dr. Angelino Viceisza, Professor of Economics at Spelman College in Atlanta, and research associate of the National Bureau of Economic Research, says that Black women have many structural barriers to achieving financial stability in retirement.

In his brief, “Black Women’s Retirement Preparedness and Wealth”, Viceisza studies single Black women and notes that they have an average retirement wealth of $11,157, the second-lowest average retirement wealth after Hispanic women. This means, as a group, they are not considered retirement-ready, and in fact, they often retire into poverty.

According to the Social Security Administration, in 2021, $13,363 ($1,113 per month) was the annual average Social Security income received by Black women 65 years and older. The maximum Social Security benefit available in 2023 is $4,555 per month, depending on lifetime earnings and age of retirement. The earliest age to begin collecting Social Security retirement benefits is 62. With Black women’s life expectancy at 75 years, there isn’t much time or resources to enjoy the golden years.

Viceisza finds that employment discrimination, low housing equity, health drains on savings and limited intergenerational wealth transfers are key factors contributing to low levels of retirement wealth for Black women. While they have a slight edge over other women in financial literacy, that isn’t enough to change their circumstances. 

“There is a financial literacy component to why perhaps they’re not as prepared for retirement. The real big component is that they just don’t have enough wealth that they are inheriting, generating and are able to pass along to their children.”

He believes that Black women reinventing themselves after retirement is a way to circumvent the economic disparity.

At age 49, Darling “Diva” Moore of Denver, Colorado, did the math on her retirement.

“I started saying, ‘Wow, I am about to turn 50, and the only thing I have to look forward to is Social Security’. And when I looked at it, I saw shoe money.”

Moore’s plan is to retire at age 62, and she will receive $2,000 monthly from Social Security. If she had chosen to wait until age 67, her Social Security income would only increase by $100 per month.

When she looked at the numbers, that was not enough to afford the lifestyle she was currently living with her husband if he were to pass away first.

“When you tell a man, your man, your husband, ‘I’m worried about what would happen to me if something happened to you,’ the first thing out of their mouth is to remind you they have life insurance.”

Statistically, Black men live on average to age 69, leaving many wives to live out their retirement as widows. Moore and her husband crunched the numbers together to gain a mutual understanding.

“I literally had to sit down with my very educated husband, who’s an engineer and got math on lock, and show him that, ‘the money put away for me to live off if you’re gone, don’t even take care of our mortgage, Boo’.”

With this revelation and her husband’s support, she spent a year devising a plan to reinvent herself to supplement her income.

At age 50, she finished her bachelor’s degree and immediately started on her master’s. Her plan is to work in corporate until retirement and then use her newly acquired education to pivot into entrepreneurship as a private practice social worker.

In the meantime, she provides counsel to other women to get their Social Security Statements early to prepare for retirement. Her main focus is to help them figure out what they “want to be when they grow up” and devise a plan to make it a revenue stream.

Viceisza found that some who aren’t able to pivot into working after retirement often look to their children as a source of help to supplement their lifestyle.

Moore says that’s not an option.

“I have no intention of living with my daughter; I see the way she keeps her house.”

Dorothy Bridges of Minneapolis has over 45 years of working in the financial services industry, and she teaches her children and others about financial security. She has yet to retire, and although she feels prepared, that wasn’t the case early in her career.  

“I learned a few things going through the school of hard knocks because I don’t think we even think about asset building when we are fresh out.”

Bridges says Black women should begin thinking about retirement as an investment in themselves. She advises starting as early as possible and looking into hiring a professional to help navigate the process and find the right mix of assets, such as real estate, stocks, savings accounts and 401(k)s.

“Make sure you understand that when you’re very early in your career, you may not be able to afford to put away the maximum into your 401(k) or other assets, but at least try to put away enough for the company to match your contribution.”

Bridges comes from a family of sharecroppers in Mississippi and knows the obstacles of learning about finance on your own, growing up without an inheritance, and the difficulty of saving when you may want to spend. She understands the need to sacrifice, change course and start fresh.

“I tell my kids, ‘short-term sacrifice for long-term gains’.”

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The hard truth is Black women earn less than white men in every state and won’t nationally reach pay equity with white men until 2144. Ariane Hegewisch for the Institute for Women’s Policy Research writes that Black women were paid 63.7 cents for every dollar earned by white men nationwide. This wage disparity costs Black women about $1,891 per month, $22,692 per year and $907,680 over a 40-year career.

Black women across the nation aren’t asking for a handout; they are asking for opportunities that commiserate with their qualifications, safe work environments and equal pay for equal work.

Washington, D.C., has the worst wage disparity, with Black women earning 45 cents. Mississippi and Texas are not far behind at 55 cents for every dollar a white man pockets. This wage theft is a stunning reality against the backdrop of Black women’s status as the most educated demographic making up 68 percent of associates degrees, 66 percent of bachelor’s degrees and 71 percent of master’s degrees between 2018 and 2019, according to the National Center For Education Statistics (NCES)

Only 11 percent of Black women are considered financially healthy, with 59 percent reporting unmanageable debt.

Adia Harvey Wingfield, professor of Sociology at Washington University in St. Louis, found that while women as a whole are advancing in the workplace, Black women are not. Black women experience motherhood penalties, gender discrimination, stifled leadership opportunities, sexual harassment and occupational segregation in the workplace at a higher rate. They are also less likely to have advocates or mentors to help them advance within the company or industry. Wingfield cited that some of these roadblocks are due to white executives’ unfamiliarity and discomfort with Black women, who are excluded from teams and on important projects. This means Black women are paying an emotional tax to work in organizations that don’t place the same value on their contributions as other demographics.

“So Black women grapple with a catch-22. If they don’t speak out, they remain invisible and easily passed over for stretch assignments, high-visibility projects and promotions. If they cry foul, they get tagged as a liability to be wary of, an angry Black woman who might levy a lawsuit on her employer, rather than as an asset to cultivate and prize for her complementary networks and market insights,” writes Melinda Marshall and Tai Wingfield in Ambition in Black + White.

Many companies refuse to acknowledge that affirmative action and diversity, equity and inclusion (DEI) programs that specifically target improving the work experience for women are disproportionally benefitting white women. Unless they also turn their attention to race, these actions will not change the financial status of Black women. “You’re either seen as a woman or seen as Black, but you’re never seen as both,” says Dr. Angela Neal-Barnett, director of the Program for Research on Anxiety Disorders in African Americans (PRADAA) at Kent State University in Ohio.

Hiring practices that often segregate Black women into low-income positions within companies and organizations are also affecting Black women’s financial health. “CNAs in terms of healthcare workers, or childcare, are essential jobs, but often have low wages and poor benefits,” says Dr. Michelle Wilson, director of Evaluation and Learning at the National Fund for Workforce Solutions. She says funneling Black women into lower-wage service jobs is intentional and historical. “That is really a holdover from slavery, the oldest public workforce system in the country.” She believes that changing workplace inequality requires unpacking its past drivers.

“You’re either seen as a woman or seen as Black, but you’re never seen as both.”

How does discrimination affect Black wealth?

Only 11 percent of Black women are considered financially healthy, with 59 percent reporting unmanageable debt, according to a study at the Financial Health Network. National Partnership for Women and Families’ Black Women and the Wage Gap study found the median wage for Black women is $36,303 per year compared to $57,005 for white (non-Hispanic) men. On par with white men, Black women are key breadwinners for their families, with nearly 80 percent of Black households relying on Black women for financial support. Counting for the wage gap, this translates to nearly four million families, with almost 1.2 million (30 percent) living below the poverty level.

According to Black Women and the Wage Gap, if the pay disparity were eliminated, on average, Black women working full-time all year round would have enough money for more than two years of childcare, more than two additional years of tuition fees for a four-year college or university and the full cost of a two-year community college. They would also have 130 more weeks of food for the family, one year of mortgage and utilities, 19 more months of rent and enough money to pay off the average student loan debt in under two years.

How can Black women protect themselves from wage theft?

When looking for a new job or career change, Black women should research Environmental, Social and Governance (ESG) scores, which are important to many public companies and their shareholders. ESG commitments that include pay transparency and equity policies can significantly affect a company’s value. During the interview, ask how ESG factors into their workplace decisions. Some investors are pressuring CEOs to balance company performance, which can be affected by employees’ beliefs that they are paid fairly. Companies that have greater transparency about pay gaps can increase their ESG scores.

Another question to ask during the interview stage or while employed is whether they routinely perform equity audits that take race, gender and other factors into consideration. “The company should routinely look at pay across all departments and levels and account for education and cost of living to ensure pay transparency and equity,” says Wilson. Payscale’s The State of Pay Equity in 2023 report found that when asked, companies did not know their gender pay gap (41 percent) or their racial pay gap (47 percent). When asked if there would be an effort to address wage theft in their companies, 27 percent said “no.”

Asking about company policies to combat pay compression is another way to determine an employer’s commitment to eliminating the wage gap. When starting salaries for external hires exceed current employees’ pay, this can have a negative long-term effect on pay disparities. 

Wilson says employers asking employees to perform duties outside their contract without paying for the expertise is a red flag. For example, asking an employee to conduct workshops for free when they typically pay an outside speaker for the same task can affect pay inequity. Or, if they did not initially provide pay for bilingual abilities and then ask the employee to translate, it may be time to renegotiate the employment contract.

“There is always room to push further in the equity space,” says Wilson.

While the pay gap remains, Black women and their families will continue to suffer. There are companies with pay transparency scales, but many experts believe that until there is full pay transparency and a desire for companies to stop engaging in wage theft, many Black families will continue down the road of poverty.

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