The issue of retirement inequality has caught fire in Washington, D.C., and a report issued this week turns up the heat.
The report zeroes in on the appalling gap in retirement security among racial groups in America. The National Institute on Retirement Security (NIRS), a non-profit research group, found that workers of color – especially Latinos – are far behind whites by every measure (view the report here). They are significantly less likely than white workers to be covered by a workplace 401(k) or defined-benefit pension. Tossing non-workplace accounts into the picture – individual retirement accounts, Roths, SEP IRAs – the report finds that two-thirds or more of black and Latino households have no retirement savings at all.
The report comes on the heels of a legislative proposal from progressive Democrats to address retirement inequality through an expansion of Social Security benefits. I wrote about that plan back in late October when it was first unveiled; they want to increase benefits for everyone by 10 percent, but would target additional increases to retirees in the low and middle end of the income distribution, most of whom rely on Social Security for nearly all their retirement income.
The idea gained steam recently when Senator Elizabeth Warren embraced it, and it touched off some intra-party warfare, with a sharp attack from Third Way, which bills itself as a centrist Democratic group – but it’s op-ed on this in the Wall Street Journal (subscription required) parroted much of the anti-Social Security rhetoric of the deficit obsession crowd (more here).
But expansion of Social Security makes tremendous sense, and it’s the only path available to bolster retirement for lower income households. The NIRS report found that workers of color, especially Latinos – are significantly less likely than white workers to be covered by an employer-sponsored 401(k) or defined-benefit pension. Among workers age 25 to 64, 38 percent of Latinos have coverage, compared with 54 percent of black and Asian employees – and 62 percent of white employees. The worst gaps are in the private sector. Latinos are 42 percent less likely than whites to have access to a job-based retirement plan in the private sector, but just 12 percent less likely in the public sector.
For households near retirement (age 55-64), the picture is grim – savings for non-white households average $30,000 – four times less than white households (average saving of $120,000).
Democrats have done a good job fighting off outright cuts to Social Security – note that the Obama Administration’s plan to cut cost-of-living adjustments didn’t make it into the two-year budget deal just wrapped up last night. That’s not surprising, given overwhelming public opposition to cuts. In fact, surveys show a broad majority favors boosting benefits, according to a public opinion poll released earlier this year by the National Academy of Social Insurance.
Note, in particular, that righthand column: 62 percent of Republicans and 71 percent of independents say higher benefits should be considered. That view holds sway across all income and age groups, too.
Social Security expansion is going nowhere in the current Congress, but progressive Democrats shouldn’t stop beating this drum.