LGBTQ Americans are less prepared for and confident about retirement

June 22, 2022 1:34 PM

LGBTQ Americans face significant disadvantages when it comes to preparing for retirement, and they feel the strain.

A new report by the Employee Benefit Research Institute (EBRI) found that non-straight Americans saved less, felt more burdened with debt and were less likely to work with a retirement advisor than other groups. Perhaps not surprisingly, the LGBTQ respondents also felt less confident that they’ll be able to comfortably retire.

Some experts say this is the result of decades of discrimination. It’s only been seven years, for example, since LGBTQ Americans gained a nationwide right to marriage — and all the legal and financial benefits that come with it.

“If you think about it, many LGBTQ+ adults came of age in a period of instability regarding their legal rights and cultural acceptance,” said Jean Dunn, a CFP and vice president at T. Rowe Price who has studied LGBTQ finances. “If you look at baby boomers and Gen Xers, there were no guarantees that same sex couples could receive spousal benefits or have family members care for them in old age. So as a result, many of them have learned about investing in retirement by themselves.”

Scroll down our cardshow to see highlights from the report and differences between the ways in which Americans save.

Low savings

Perhaps the most surprising statistic of EBRI’s study is the number of LGBTQ respondents who have never saved for retirement at all. Compared to their heterosexual peers, fewer non-straight Americans said they’d ever saved their own money for their golden years (not including Social Security or employer-provided benefits). This difference was true across all age and income groups. Among Generation Xers, for example, just 53% of LGBTQ earners said they’d saved for retirement, while 72% of straight respondents said they’d done so.

High debt

One possible reason for this lack of savings is debt, which appears to be draining many LGBTQ wallets. Across all income and age groups, more non-straight Americans said debt was a major or minor problem for them. Among millennials, for example, 78% of LGBTQ earners said they had a problem with debt, compared to just 60% of heterosexuals. Many LGBTQ respondents said this debt was making it harder to save.

“Retirement savings may not be as high a priority relative to other financial needs in the moment,” Lisa Greenwald, CEO of Greenwald Research, explained at a webinar presenting the study. “Reducing debt is a higher priority and goal for LGBTQ respondents.”

Low confidence

According to EBRI’s findings, LGBTQ earners feel much less confident about their ability to retire in comfort than straight Americans. This, too, was true across all age and income groups — even the highest wealth bracket. Among Americans earning $75,000 or more, 89% of straight respondents said they felt very or somewhat confident about retirement, but only 76% of LGBTQ Americans felt the same way. Similarly, fewer LGBTQ respondents said they felt knowledgeable about managing their finances or knew who to turn to for advice — something that could also stem from discrimination.

“If you don't think you can rely on anyone else, if you can't rely on your government, you can't rely on family, then it’s almost like a higher bar to make sure you're responsible,” Dunn said. “So to me, it's completely understandable why there are lower confidence levels.”

The DIY approach

LGBTQ respondents were also far less likely to work with a professional financial advisor. In general, just 24% of non-straight earners said they currently have an advisor, while 36% of straight respondents say they do. This difference was most pronounced in the middle income group — $35,000 to $74,999 — in which the percentage of heterosexuals who worked with an advisor (32%) was nearly double that of LGBTQ Americans (17%).

Looking for allies

When looking for a potential financial advisor, however, LGBTQ respondents were very clear about their criteria. Around 63% said it was important for the advisor to be an ally of the LGBTQ community, compared to only 21% of straight respondents who said so. They also showed a strong preference for advisors who shared a “similar upbringing or life experiences” — 51% of LGBTQ respondents said that was important, while only 40% of heterosexuals said so.

Fortunately, according to Dunn, a few simple steps can show an LGBTQ client their advisor is an ally.

“Are you looking at the photography on your website, in your office, and is that inclusive?” Dunn asked. “In a virtual setting after my name, I include my pronouns. There are some really easy signals that you're proactively demonstrating to a member of the community that either you're a member of the community, or you're an ally without having for them to ask.”

More to learn

At EBRI’s webinar, the panelists emphasized that while their study has shed some light on LGBTQ investment habits, there is still much more research to be done.

“There’s really so much more to learn, and it really seems to be a growing population,” said Craig Copeland, director of wealth benefits research at EBRI. “And it’s something that we need to recognize and understand and really help everyone, regardless of what their orientation is, to get to a better spot in retirement.”