Social Security, the system millions of Americans have depended on for decades is in trouble. The implications are dire for the most needy among us — millions of minorities and ethnic groups on the lower rungs of the socio-economic ladder.
Frank Bane, in the article, "Social Security History" indicates that the Social Security Act, enacted on August 14, 1935 as part of a plethora of New Deal legislation under the direction of President Delano Roosevelt, offered all Americans the ability to put money back during their working years’ to utilize in retirement. During the 76 years of social security, many hands have manipulated that promise of retirement.
Currently, solutions to the rapidly dissipating retirement funds threaten to deplete the security of retirement for future generations, which means those needing social security the most are likely to lose the most. Those with middle to lower income will be affected the most by the social security changes. With such an unstable system, minorities and other groups with little or no discretionary income are the ones who should educate themselves now on retirement rather than depend on a program that may not be an option in the future.
Planning for the future is a consistent issue for minority workers. David C. John, in the article, "Disparities for Women and Minorities in Retirement Savings," states that black workers are more often to be public sector employees. He also adds that public sector jobs offer 401(K) benefits however only 50 percent of African-Americans participate in 401(K) programs in contrast to 59 percent of whites who participate in retirement programs offered by their employer.
One reason African-Americans opt out of an employer’s retirement program is that their wages are just enough to provide for their families. John explains that blacks earn on average $32,000 annually, which is about two-thirds of a typical household in the U.S. Approximately 17 percent of the African-American population is listed as one of the lowest annual salary groups.
Even less Hispanic workers participate in a retirement program, only 25 percent of Hispanics participate in an employers’ 401(K) option because as John says, Hispanics have retirement savings are lower because their salaries are much lower than the typical American household with earnings at around $23,000. These low incomes prevent both Hispanics and African-Americans from participating in an employer’s retirement 401(K).
Since it takes longer for lower income employees to prepare for retirement programs due to lower earnings, Steve Vernon, in his article, "Retirement Planning for the Middle Class: 3 Essential Strategies," suggests that workers work as long as they can before retiring because they do not earn an average annual income of $48,000.
Vernon also recommends that individuals delay using their social security benefits in order to allow them to accumulate for maximized benefit, but adds that seniors should apply for benefits before age 70.
Vernon also suggests using home equity because it allows families on a fixed retirement budget to generate additional income. Vernon recommends several options for utilizing home equity, which includes selling a home and purchasing a cheaper house, or renting a home to free up cash. Another option is to rent out rooms, or utilizing a reverse mortgage to provide additional income, but he says this should be a last option.
If minorities and those who suffer from lower wages plan for retirement early, it will allow them to have the freedom to retire as intended. And if social security still exists when they retire, it will be a beneficial cushion to their meticulous planning. But at this time, it is not advisable for younger lower income populations to plan on social security; rather they should count on the money they earn today in their plan for the future.
John, David C. Disparities For Women and Minorities in Retirement Saving. Brookings. http://www.brookings.edu/testimony/2010/0901_retirement_saving_john.aspx
Vernon, Steve. Retirement Planning for the Middle Class: 3 Essential Strategies. moneywatch.com. CBS. October 15, 2010. http://moneywatch.bnet.com/retirement-planning/blog/money-life/retirement-planning-for-the-middle-class-3-essential-strategies/2152/