Preparing for Retirement as an LGBTQ+ Person

For many Americans, saving up enough money for a comfortable retirement is challenging. There’s a lot to learn, starting when you begin working in your teens or 20s. If you work for a company that offers a savings plan, then you’ll need to learn how a 401(k) plan works, as well as some investing basics. All workers should know how an individual retirement account (IRA) might be an alternative way to save for retirement, whether in addition to a company plan or as their only method for tax-advantaged saving. 

Accumulating sufficient assets for a comfortable retirement is even more difficult if you get a late start. Earning a lower salary is another headwind.

Unfortunately, for older members of the LGBTQ communities, both factors play a part in widespread retirement uncertainty for them. Nearly half of LGBTQ+ older people fear they will outlive the money they saved for retirement, compared with just a quarter of non-LGBTQ+ older people, according to David Vincent, chief program officer at SAGE, an LGBTQ+ advocacy organization in New York.

“One in two single LGBT older people believe they will have to work well beyond retirement age, as compared to less than a third of single non-LGBT older people; and more than half of the LGBT older adult population is concerned about not having enough money to survive retirement,” Vincent said.

Higher Poverty Rate

“There is this preconceived notion that all gay people are rich and fabulous,” Vincent said. “We may be fabulous, but the data does not indicate that we are rich.”

In fact, Vincent noted, LGBTQ+ individuals of most races and ethnicities show higher rates of poverty than their cisgender straight counterparts. “According to the Williams Institute [at UCLA School of Law], 22% of LGBT people in the U.S. live in poverty, compared with 16% of cisgender straight people, and 29% of transgender people and bisexual women live in poverty,” Vincent said.

The ability to wed has simplified the financial lives of same-sex couples, but many LGBTQ+ investors still lag behind heterosexual people in terms of saving for retirement. Prudential found in a study that LGBTQ+ people are less likely to have a will or estate plan (19% vs. 26%). In addition, they are less likely to have 401(k) savings (35% vs. 40%) and to save less of their paycheck (18% vs. 30%) in retirement accounts.

“It is difficult to make generalizations about members of the LGBTQ community,” said Jennifer Hatch, president of New York firm Christopher Street Financial, which specializes in the financial issues of LGBT couples, individuals, and their allies.

This diverse community has members in every socioeconomic, demographic and ethnic group, Hatch said, as well as every geographical location. “What we do have in common is social and legal support—or opposition—to our lives,” Hatch said. “That is where we can begin to identify financial benefits and challenges.”

People need to set aside preconceived notions and recognize that these inequities stem from a lifetime of systemic discrimination, Vincent said. “You can’t build a nest egg for your later years when you’re not getting the job you deserve, or the raise, or the loan, or the credit line, because you’re being discriminated against. Only sweeping change, such as the Equality Act, and time, can help change these numbers.”

Depending on the state where you live, discrimination still impacts the livelihoods of LGBTQ people, Hatch said. “Sometimes this is overt and legal, and sometimes it is covert and illegal. Either way, all forms of employment discrimination impact an individual’s career choices, ambitions, expectations, and ultimate financial resources,” Hatch said.

“Discrimination is still rampant and has a chilling effect on financial wellness,” Vincent said. “The LGBTQ+ community still has less financial security than the general population due to a lack of federal nondiscrimination protections. That’s why it is vitally important for the Equality Act to become law.”

Financial Needs

Hatch said she is often asked why her firm specializes in the financial needs of the LGBTQ community. “In other words, what’s gay about money?” Hatch said.

Before the U.S. Supreme Court established marriage equality in 2015, the answer was easy: nothing—and everything. For single people in the LGBTQ+ community, financial needs are no different from those of a straight person. But those in committed same-sex relationships might well have completely different issues, according to Hatch. For one thing, if you had jointly owned assets and were planning for the future, the picture was entirely different when you were not able to marry. 

“The benefits of marriage are huge, and no amount of financial or legal planning can substitute for them,” Hatch said. “There are over 1,100 different statutes that provide benefits, rights and responsibilities exclusively to married spouses. Financial planners, estate attorneys and accountants spent a lot of time trying to create work-arounds that did not exist.”

Today, with the option of marriage, the tools for protecting families and wealth are immeasurably stronger. But, all the same, there are plenty of people—gay and straight—who choose not to be married, Hatch noted.

Why LGBTQ+ Americans May Have a Savings Shortfall

Members of the LGBTQ+ community face the same challenges as everyone else, Hatch said—namely, a lack of financial literacy. For anyone to prepare adequately for a comfortable retirement, it helps to arm yourself with a working knowledge of financial basics. Getting a grip on everyday budgeting, understanding your paycheck, avoiding credit card debt, and taking advantage of tax-advantaged savings plans are all essential components of creating a solid financial foundation. 

Some in the LGBTQ+ community may suffer additional scrutiny and discrimination, said Laura LaTourette, a CFP and independent advisor in Dahlonega, Ga. Someone may lose employment and be afraid to return to work because they’re in a population who faces discrimination. Also, LaTourette noted, some people have underlying health issues, a particular issue for members of the trans community.

“Some clients who needed help with money had a really hard time working with the system because they have to divulge everything,” she said. “They are trying to stay under the radar.”

When people find it difficult to ask for help, they often wait until the last minute to apply for Paycheck Protection Program (PPP) loans and unemployment benefits, LaTourette said, which many were unfamiliar with. “They try to stay away from big government [programs] where they will have their identity questioned.” With many people facing debt and problems with credit card companies, LaTourette spends time on the phone helping to advocate, just as she did during the Great Recession of 2008.

Spending Can Hamper Preparedness

People’s top financial goals are generally saving more money and preparing for retirement, according to the Prudential study. Both LGBTQ+ respondents and respondents in the general population are keenly interested in financial preparedness, with saving enough for a comfortable retirement a top financial goal. But despite agreeing that saving for the future is important, LGBTQ respondents are likelier to identify themselves as “spenders” compared to general population respondents, the study found.

Likewise, LGBT respondents tend to spend more (and save less) compared to general population respondents. For LGBT respondents in particular, meeting their goals for saving more will hinge on finding ways to spend less. 

Getting Closer to Retirement 

People who are older but have inadequate savings need to take advantage of retirement plan catch-up provisions that allow you to contribute more money after age 50, said Michael Sangirardi, a financial advisor and CFP with Ameriprise in New York.

It makes sense to scrutinize expenses, especially housing costs, in your 50s, Sangirardi said. Ask if this is the home that you plan to retire in and whether it makes sense to downsize or even stop owning a home. “Renting is not evil,” he said, since it can buy flexibility.

Having more choices as you get older is important. If you lose your job, then you might be able to leverage more money from a side hustle. This may start out as a way to explore something interesting that is also profitable if you’ve never had a chance to test a different career, Sangirardi said.  

People approaching retirement can look for a place with affordable healthcare or a desirable climate, but people in the LGBTQ+ community also need community, support, acceptance, and safety, Sangirardi said.

“This community historically has suffered tremendously with issues of safety and acceptance, and it comes back to what you need even more as you age,” Sangirardi said.

Resources for LGBTQ+ Seniors 

Seek out professionals with whom you feel comfortable, whether it’s a financial planner, lawyer, or estate planner. Many banks and credit unions are also welcoming to LGBTQ+ people. 

SAGECents is a digital wellness platform made specifically for LGBTQ elders to increase financial stability and reduce economic stress.

The app was created in partnership with a financial tech firm with support from the Wells Fargo Foundation, and its goal is to address the concerns and needs of older LGBTQ people. The app asks specific questions about sexual orientation and gender identity, to point people to the right resources.

“We have heard from users how much they appreciate being able to choose their own pronouns and how helpful particular resources are, like ‘Creating End-of-Life Documents for Trans Individuals,’” said Vincent. “Some people may not ask those questions or get to those resources because thinking about retirement, healthcare proxies, or end-of-life issues are incredibly difficult, or they might not know who to talk to.”

A Changing World

The future could look somewhat different. “I see big changes in expectations,” Hatch said. “I think that LGBTQ people, including myself, never imagined being married.” 

Marriage equality has a positive impact on retirement income streams, such as Social Security benefits and state pensions, among others, Vincent noted. “These revenue streams did not always recognize same-sex partners, so marriage made it easier for couples to have access,” Vincent said. “In addition, there have also been workplace discrimination cases decided favorably by the Supreme Court, which has helped some.” 

Another change in expectations is reflected in the number of young LGBTQ people who assume they will be parents, Hatch said. According to Family Equality, 63% of LGBTQ millennials expect to become parents.

“These people are actively planning families,” Hatch said. “This was rarely considered or accomplished among those in my generation. Of course, I always planned to find my one great love—which I did, over 25 years ago. But, I never expected more. I get choked up to think that I am married to her and that my relationship is recognized by the law, the state, and all of my neighbors.”