NB22-07: Mortality Differentials and the Racial Retirement Wealth Gap

One of the principal manifestations of structural racism is the mortality differential between Blacks and whites. Currently, this is reflected in the substantial racial morbidity and mortality gap resulting from the COVID-19 Pandemic. While the racial mortality gap has lessened over time from the 1980s to 2019 according to CDC figures, the most recent evidence (for 2020) indicates a sharp widening of the differential during the COVID-19 Pandemic to 6.0 years between whites and Blacks. Disparities in mortality rates play a key role in accounting for the gap in defined benefit pension wealth and Social Security wealth, since in their calculation, future benefits are weighted by survival rates in each year. Defined benefit pension wealth is defined as the present value of future pension benefits weighted by survival probability and Social Security wealth is defined in analogous fashion based on future OASI benefits. Both are key determinants of family well-being and retirement adequacy. In 2016, the racial ratio of mean pension wealth and mean Social Security wealth were 0.50 and 0.60, respectively. These disparities are quite large by any reasonable standard.
The main contribution of the project is to analyze how much of the differential in these two key wealth components are ascribable to racial disparities in life expectancies. Though a large number of studies have provided estimates of retirement wealth and a small number have looked at the racial gap, as far as I can ascertain, none has analyzed the impact of the racial mortality differential on the retirement wealth gap, and certainly none has performed this analysis over the COVID-19 Pandemic. On the policy front, one possible amelioration for the differential in Social Security wealth is to adjust the calculation of PIA (the formula used to compute the OASI benefit level) to reflect racial differences in mortality rates. This project will simulate different policy options and evaluate them from the standpoint of reducing the wealth gap.