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Industry Spotlight > Women in Wealth

Financial Confidence Is Up for Women of Color, but Retirement Readiness Still Lags

By John Manganaro

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What You Need to Know

  • A new study from Edelman Financial Engines examines the financial outlook of working women of color, who represent an important and growing segment of the workforce.
  • According to a variety of measures, these workers are growing more financially confident and are prepared to take risk to achieve long-term money outcomes.
  • When it comes to retirement preparedness and access to advice, however, some findings are more concerning.

Women of color working in the United States report feeling more optimistic about their abilities to earn and save, according to a new report published this week by Edelman Financial Engines, and their perceived preparedness for retirement is evolving as well.

As explored in the paper, “Women of Color and Wealth: Striving to Create a New Financial Future,” survey data suggests many women of color in the United States are committed to writing their own financial narratives to create better outcomes for themselves and their families — despite the persistence of unjust wage gaps and other hurdles.

According to the study, approximately two out of three women of color report “actively forging a more secure path” and striving to avoid financial mistakes they witnessed growing up.

In a press release accompanying the new report, Rose Niang, director of financial planning at Edelman Financial Engines, points to the broad financial disparities women have traditionally encountered, noting how those of color have faced additional obstacles, including larger wage gaps and a lack of tailored financial literacy resources.

“Despite these hurdles, our study reinforced a number of areas where progress is being made  specifically with developing greater financial confidence and a positive economic outlook,” Niang says.

When it comes to retirement preparedness, the findings are more concerning. According to the analysis, one of the biggest confidence gaps between men and women is feeling certain about how much money is needed to retire. Men of all races are significantly more confident than women of all races that they know approximately how much money they will need to retire.

Meanwhile, women of color are the least likely of all gender, race, and ethnic groups to have a short-term financial goal of funding retirement savings. Despite this fact, compared to their white counterparts, more women of color feel confident in their ability to meet long-term financial goals, and they are also more likely to approach investing with a risk-taking mindset.

Significant Financial Headwinds

As explained in the report, women of all races face a wage gap when compared with white, non-Hispanic men, but that gap is even more significant for women of color. Specifically, Black women in the U.S. are paid 36% less than white men and 12% less than white women on average.

Latinas in the U.S. are paid 46% less than white men and 26% less than white women, while an Asian American woman who works full time is paid 85 cents for every dollar paid to a white, non-Hispanic man. Native American women, for their part, are at the median paid 60 cents for every dollar paid to white, non-Hispanic men at the median.

In the face of this wage gap and the commensurate uneven distribution of household wealth, women of color broadly report taking pains to actively create new financial futures for themselves and their families. For example, the survey shows 67% of women of color are “forging a financial path that is different from the one they saw growing up.”

Key to this effort, the research shows, are steps such as creating a budget to ensure one is living within their financial means and investing in education. There are also clear benefits to working with professional financial advisors and engaging with resources provided via workplace retirement savings plans — but, unfortunately, doing so is not necessarily straightforward.

According to the report, women of color commonly report facing untrue, harmful stereotypes that prevent them from receiving trusted financial advice about retirement and other goals. Further impacting their confidence, women of color are the most likely of all groups to report not being taken seriously by financial professionals, and they are also most likely to report they have experienced or suspect they have experienced discrimination when trying to access financial advice or planning.

“As women of color continue to take greater control of their own financial journeys, it’s more important for employers and planners to listen carefully and understand how to address their unique needs,” Niang adds. “Having a wide array of solutions, and fostering open, honest discussions that educate without casting judgment can build confidence and lead to better outcomes, especially with underserved populations.”

Other Key Stats for Planners

Based on the aforementioned discrimination they have experienced, women of color are nearly twice as likely as white women to say it’s “extremely important” that their financial planner understands their values and culture. This is a clear challenge for the advisory industry to confront, according to the research, as less than a quarter of certified financial planners are women, while only 1.8% of CFPs are Black and 2.9% are Hispanic.

The study suggests there is substantial overlap in the shared goals of working Americans across race and gender, but women of color have several priorities that are more prevalent in their demographic group. They are more interested in conversations about building generational wealth than white women, for example, and they are significantly more likely than white respondents to prioritize being able to offer financial support to a family member or friend.

The good news for financial professionals hoping to serve this group is that they are generally hungry for more advice and support.

“Women, regardless of race, want greater access to financial planners, opportunities for knowledge building, access to self-education tools, and automatic increases to their 401(k) contributions over time,” the report states. “In particular, women of color are eager for help with financial planning and are slightly more receptive than their white counterparts to receiving financial advice.”

Despite this interest, about a quarter of all women surveyed have no access to financial education or support from their employer. In comparison, men of all races are significantly more likely to report their employer is very helpful in providing financial education and support.

(Photo: wavebreakermedia/Shutterstock)

John Manganaro

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