Due to a severe loss of housing wealth from 2007 to 2016, a new report from the Center for Retirement Research at Boston College suggests that Hispanic households face a greater risk of having inadequate retirement income compared to white and black households.
In its report, Trends in Retirement Security by Race/Ethnicity, the CRR examined how its National Risk Retirement Index (NRRI) – which measures the percentage of working-age U.S. households (ages 30-59) who are “at risk” of being unable to maintain their pre-retirement standard of living in retirement – can be applied to households of different races and ethnicities.
Home ownership rates and home prices have a significant impact in the NRRI because it is assumed that these households will access their home equity at retirement by taking out a reverse mortgage.
“While the decline in house values was about the same for blacks and whites, Hispanic households saw their median value drop by 41 percent between 2007 and 2016,” according to the authors of the report, who noted that the housing downturn was sharply felt in Nevada, Florida, Arizona, and California where significant numbers of Hispanics live.
Homeownership rates in 2016 were also lower across the board than in 2007. The declines, however, were particularly large for black and Hispanic households; less than half of these households now own homes.
“Since home equity is a major source of retirement income in the NRRI, the decline in homeownership, combined with the decline in home values, has hurt minorities, and the story has been particularly bad for Hispanics who bought homes in the wrong place at the wrong time,” the authors added.
The NRRI is published every three years using the Federal Reserve’s 2016 Survey of Consumer Finances, a survey that collects detailed information on household assets, liabilities, and demographic characteristics.