America’s families face a looming retirement crisis and it is worse for Asian-Americans and other communities of color than for whites. Millions of Asian-Americans work in low paid jobs located in high priced communities, but without benefits. Older Asian-Americans rely more on public assistance than any other population groups. Income and wealth inequality among Asian-Americans have also been rising over the past three decades. Many low-income and middle-income Asian-Americans then face a more dire prospect in retirement than their white counterparts.
News reports and research items often portray Asian-Americans as economically successful and secure. Yes, many Asian-Americans have substantial income and wealth, similar to that of whites. But using one number such as an average or even a median obscures the tremendous economic diversity of the Asian-American community and leads observers to ignore the widespread hardships that many older Asian-Americans face.
Asian-Americans, as the fastest growing racial group in the country, are also a very diverse population with a large and possibly growing share facing economic hardships in retirement. Asian-Americans come from many different cultural, social and political backgrounds. Some came to the US for economic opportunities, others to join their families and yet others fled persecution, war and violence at home. These varied experiences contribute to large economic differences across groups. Moreover, some families have been in the US for generations, while a large share are recent immigrants. Each generation, even within the same cultural and ethnic group, arrives in the US under its own unique circumstances, facing obstacles and discrimination for some but also good job opportunities for others. Economic experiences – income and wealth – can thus be different within the same group. Policymakers interested in promoting measures for greater retirement security will do well to understand the diversity and struggles within the Asian-American community.
In fact, many older Asian-Americans already face substantial financial insecurity. For example, a larger share of older Asian-Americans, 65 years old and above, relied on public cash assistance such as Supplemental Security Income (SSI) in 2014 — more than any other demographic group. In 2014, 12.6% of older Asian-Americans received some public cash assistance and it amounted on average to 9.0% of their income. In comparison, only 3.5% of older whites got some public cash assistance for an average of 1.7% of their income that year.
Even with this greater reliance on public cash assistance, poverty among older Asian-Americans was more pronounced than among white. One-in-seven, 14.7%, of Asian-Americans 65 years old and older lived in poverty in 2014, compared to only 8.7% of whites– a gap of nearly 70%.
The outlook is not good for Asian-Americans seeking a secure retirement. Income inequality has risen faster for Asian-Americans than for any other group from 1970 to 2016. By 2016, Asian-Americans in the top 10% of the income distribution earned 10.7 times the income of those in the bottom 10% of the income distribution. For whites, this ratio has also increased, but amounted to only 7.8 times in 2016.
The growth in the income disparity is partially due to decades of stagnation in income levels for Asian-Americans in the bottom income brackets. The incomes of Asian-Americans at the 10th percentile grew by only 11% from 1970 to 2016, which is equal to an annual increase of less than 0.3%. These gains are less than for any other racial, ethnic and income group. This slow growth of incomes at the bottom of the income scale results from more immigration and fewer opportunities to get ahead for people with limited resources in the forms of education, savings and networks. Many new immigrants, especially from countries such as Myanmar and Bhutan end up working in low paying jobs with no benefits for long periods of time.
The lack of good labor market opportunities means that many Asian-Americans have fewer retirement benefits than is the case for whites. Looking only at families in the bottom of the income distribution, only 10.4% of Asian-Americans had a defined benefit (DB) pension from 2010 to 2016, compared to 34.9% of whites.
This massive gap in pension coverage is not offset by more savings in 401(k)s or IRAs for Asian-Americans. On the contrary, lower-income Asian-Americans were slightly less likely to have a retirement account from 2010 to 2016 – 32.5% compared to 33.1% for whites — and had smaller balances — $15,349 compared to $19,976 for whites . The likelihood of financial insecurity in old age will thus continue to be greater for Asian-Americans than for whites.
The term Asian-American captures a very diverse and dynamic community. Massive income and wealth inequality already reflect this diversity. Many older Asian-Americans already suffer in retirement and this retirement income insecurity will get worse in the future