Social Security Reform and Closing the Racial Wealth Gap
Posted on Sep 15, 2013
As Boston Social Security lawyers, we keep a close eye on the impact Social Security reform has had on the United States. In late August, during the March on Washington 2013 event, we were saddened to see the figures that show the gap between black and white wealth has widened.
Over the last 50 years, it appears that little progress has been made toward closing this gap. According to Pew Research Center, the gap between blacks and whites in median household income in 2011 was $27,000. In 1967 the gap was $19,000 between black and white households. The gap between median household net worth was even larger at $85,000 between black and white households. This is an increase from when data was first collected in 1984, where the gap was $75,000.
Further analysis by Star Parker, the President of CURE, the Center for Urban Renewal and Education, suggests a few opportunities to narrow this gap.
According to the Pew Research Center, in 2009 about 80 percent of whites and 41 percent of blacks had an IRA, Keogh, thrift savings account, or 401(k). This is a dramatic difference. Parker suggests reforming Social Security to allow low-income Americans to opt out of Social Security and instead use the funds they are forced to pay in taxes to invest in retirement accounts that grow wealth over time. She believes that this would give people a greater opportunity to accumulate more money over their lifetimes and narrow the gap between black and white wealth through stronger retirement savings.
In 2010, the Wall Street Journal published a study by William Shipman and Peter Ferrara. This study analyzed how much average-income earners would accumulate over a 45-year working life if the Social Security tax money were put into retirement instead. The results found that families could earn 75 percent more than they would receive from Social Security.
As Massachusetts Social Security lawyers, we understand the importance of having a solid system in place to support those in need, and hope that a Social Security reform solution can be found to narrow this gap so that everyone can have the money and net worth to live comfortably. But we caution policymakers to remember that the Social Security system is not just for retirees; any reform that takes place to broaden retirement savings must also ensure a place at the table for America’s disabled citizens, too.