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Retirement Inequality in the LGBTQ+ Community

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Retirement Inequality in the LGBTQ+ Community

Al Waller: June is Pride Month, which celebrates the LGBTQ+ community. It is observed around the world with parades, festivals, workshops along with other activities to commemorate the June 1969 Stonewall Uprising that took place in New York’s Greenwich Village following a police raid on a gay club, the Stonewall Inn, which sparked a movement.

Pride Month also gives us an opportunity to remember the discrimination and exclusion this community has historically faced, while simultaneously applauding the remarkable progress it has made in the 50-plus years since the uprising.

Although major strides have been made, many people in the LGBTQ+ community continue to experience discrimination and lack some of the legal protections afforded their heterosexual counterparts. At the end of the day, Pride Month gives us a chance to promote equal justice and opportunity for this community, during their working years and into retirement.

Welcome back to ClearPath – Your Roadmap to Health & WealthSM. I’m your host, Al Waller. With me is Catherine Collinson, CEO and president of nonprofit Transamerica Institute®, to share insights and recommendations.

Catherine, nice to be together again.

Catherine Collinson: Hi Al. It’s great to be back. I am so glad that we are celebrating Pride Month on the show. Thankfully, the world is a much different place today than it was 50 years ago during the Stonewall Uprising. Societies are now more welcoming of LGBTQ+ people, and more are identifying as such, especially younger people.

Al Waller: Agreed. I recently saw a 2021 Gallup Poll that shows stark differences in people identifying as LGBTQ+ by generation – finding 21 percent of Gen Zs and 11 percent of Millennials identify as LGBTQ+ compared with just 4.2 percent of Gen Xers and 2.6 percent of Baby Boomers.

What does that tell you? What implications does this have, Catherine?

Catherine Collinson: Well, of course young people always have and always will have a profound impact on the future of society, and today's young people are having a profound impact on the future of diversity, equity, and inclusion.

But since we are talking about future retirement, I do not want to lose sight of Baby Boomers and Gen Xers. There are about 70 million Baby Boomers in the U.S., according to Insider Intelligence. So, even with just 2.6 percent identifying as LGBTQ+, that identifies to more than 1.8 million people. Combined with Gen X, the oldest of whom are turning 57 this year, there are a lot who are nearing retirement. It is a light on the horizon that is growing brighter.

Al Waller: Well, I agree with you, and that's pretty significant in size of numbers. While we can celebrate the victories gained in recent years, such as marriage equality and workplace protections, it is important that we really remember those Baby Boomers and Gen Xers have already lived much of their lives without the ability to marry. They have also faced both subtle and overt discrimination at work, all of which have impacted their finances right, Catherine?

Catherine Collinson: Indeed – those are really great points, Al. Overall, our research finds that many are at risk of not achieving a financially secure retirement. According to findings from our most recent report on the topic, only 19 percent are “very confident” that they will be able to fully retire with a comfortable lifestyle.

Al Waller: What else can you tell us about the general financial profile of members of this community at large?

Catherine Collinson: Our survey finds that they have saved significantly less in total household retirement savings. They have saved an estimated median of $43,000 compared with $99,000 among their non-LGBTQ+ counterparts.

A major factor is age. We have already touched on that many younger people are self-identifying as LGBTQ+, and we see this in our research as well. The median age in the workforce is 33 which compares with age 41 of non-LGBTQ+ workers. What this means is they are 8 years younger, and they have had 8 fewer years available to save and build and grow their retirement savings.

However, as we look at this retirement savings gap, there are other major factors that we have to consider. Specifically, our research finds they earn less and they're more likely to work part-time, which often means they don't have access to employer-sponsored retirement plans. Also, they're more likely to be single. So, there's only one person reflected in those total household retirement savings.

Al Waller: Right. I know we suggest that listeners start saving for retirement early, often, and consistently. How would this group be faring in that respect?

Catherine Collinson: They are doing a terrific job saving for retirement – and have an opportunity to do an even better job. Let me share some striking findings from our survey work.

Almost 3 in 4, seventy-three percent are saving for retirement, either in the workplace or outside of work. They started at a median age of 25. They are starting young and they're getting a really strong start. I mentioned almost 3 in 4 are saving – I would love to see that number closer to 100 percent.

I would also like to give a big shout out to those who are participating in an employer sponsored 401(k) or similar plan. The median annual contribution to those plans is 15 percent, meaning they are – as a median – contributing 15 percent of their annual salary to the plan and that is just super impressive.

Al Waller: Well, count me as one of those that is impressed. It sounds like they really get the importance of savings, but how are they doing as far as planning for the future?

Catherine Collinson: That is an opportunity. They are doing a fabulous job saving, and many more could be engaging in retirement planning. Only 34 percent – that is just one in three – have formulated a written financial plan as a retirement strategy.

As we have talked about on the show, many times Al, a written plan is your roadmap, and we know that it is all but impossible to reach a destination if you don't have a roadmap to get there. Your retirement strategy includes goal setting, how much you need to save, investing, and even course corrections along the way – because our lives can change. If we start saving at 25 and are going to retire beyond 65 or 70 or later – that could be 50 years.

Al Waller: At the risk of sounding like a broken record – and as I've said in the past, what's written gets done. With that said, I couldn’t agree more. Did your research surface any other issues, Catherine?

Catherine Collinson: One thing I'd like to put a big spotlight on is caregiving. Almost half – 48 percent of LGBTQ+ workers – are either currently serving or have served as caregivers to an aging parent, family member, or loved one in the past. This, for your reference, compares with 38 percent of non-LGBTQ+ workers.

Now, a large majority of both groups have made some sort of adjustment to their employment situation, which could translate to their financial situation as a result or in response to becoming a caregiver. The types of adjustments made range from missing days of work, reducing hours – a few have even quit their jobs altogether.

So, if you are faced with caregiving responsibilities, I highly recommend that you do your homework and carefully consider your options, especially if you are thinking about taking time out of the workforce or dropping out of the workforce altogether. It can come as a really high price in terms of lost income, lost benefits, and the inability to save for the future. If there is any way you could maybe shift to part-time or work on a contract basis, you can continue earning and saving, and it is easier to dial back up full time when you are ready to do so.

Also, I want to point out that many employers are now aware of the prevalence of caregiving employees and are responding by enhancing their employee benefits programs. So, if you have not looked at your employers' programs lately, now is a great time to do so. There could be benefits in there that you just are not aware of that could really be helpful if you find yourself as a caregiver.

Al Waller: Well, that's really encouraging because as you've noted, a lot of companies offer help identifying caregivers or retirement living arrangements through their EAPs or Employee Assistance Programs.

So, what else have you got on your mind? Did any other issues surface during your research?

Catherine Collinson: Let’s go back to retirement and there are 3 issues that I just want to point out. They are on my mind a lot, and I just want to put some emphasis on them. I'll take them one at a time.

First, I mentioned earlier that LGBTQ+ workers are more likely to work part-time, which means they are less likely to have access to employer-sponsored 401(k)s or similar plans. So, if you work part time or if you work for an employer that does not offer benefits, consider opening an Individual Retirement Account (an IRA) so that you can start saving for retirement on a tax-advantaged basis. Most banks, credit unions, and financial institutions offer them.

Second, it is all over the news these days about the “Great Resignation”, the “Great Quit”. Job changing is at an all-time high. So, if you are changing jobs or considering changing jobs, be sure to look at the total benefits offering of your current employer, as well as any future employers to see what's available – to do an “apples-to-apples” comparison –and of course, pay close attention to those retirement benefits.

Then the third thing is – speaking of job changers, I am just super worried that many are not fully considering their options about what they can do with their 401(k) account when they leave an employer. We talked about this at length on a previous episode of ClearPath.

So, I'll just touch on the four major potential options. One is, you may be able to keep your savings in your former employer's plan. Two, you can roll it over into an Individual Retirement Account or IRA, or three, you might be able to roll your balance into your new employer's plan. The fourth option, which I recommend against – I highly discourage – is cashing out your savings. By doing so, you will likely face a tax bill, as well as a potential penalty if you are under age 59 ½, not to mention, these are retirement savings and someday (i.e., when you retire) you're going to need them.

Al Waller: Yes, you will. Sage and comprehensive advice, as always Catherine – and again, great to have you with us.

We hope you’ll join us for future episodes. Also, in case you missed them, check out previous episodes including “The Great Resignation – Options for Your 401(k)” that Catherine just referred to, and “Rising Inflation Explained.”

ClearPath – Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being. You can find our weekly podcast on WYPR’s website and mobile app, wherever you get your podcasts, and at transamericainstitute.org.

ClearPath – Your Roadmap to Health & Wealth is produced by Transamerica Institute with assistance from WYPR.

If you have ideas for future episodes, comments, or feedback, please email us at [email protected].

Until the next time, I’m your host Al Waller. Stay safe, be well, and thanks for listening.

The information provided here is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical, or financial advice or guidance.

Al Waller is a long-time Baltimore native and employment expert with a 30-year career in leading and advising locally and globally based corporations on matters including: Talent Acquisition and Retention, Employee Relations, Training and Development.
Catherine Collinson is the founding president and CEO of nonprofit Transamerica Institute and its Transamerica Center for Retirement Studies, and she is a champion for Americans who are at risk of not achieving a financially secure retirement. With two decades of retirement industry-related experience, Catherine is a nationally recognized voice on workforce, aging, and retirement trends. She was named a 2018 Influencer in Aging by PBS’ Next Avenue. In 2016, she was honored with a Hero Award from Women’s Institute for a Secure Retirement (WISER) for her tireless efforts in helping improve retirement security among women.