Despite social progress in the last half-century, today's racial wealth gap remains vast: 13 cents in Black wealth for each dollar in White wealth. This paper explores how present-day racial disparities—regardless of their historical cause—will affect the future wealth of an ordinary family of each race.
Using best-in-class financial planning software, we have created an in-depth planning simulation—based on national data from a variety of reputable sources—to capture the financial trajectory of a typical Black and White family. Our probability-weighted model found that in 2064, the White family will possess $2,782,727 in wealth while the Black family's wealth will be $789,164—or more than 70% less. Even if both couples earn bachelor’s degrees, save the same percentage of income into their 401(k)s, and invest identically, the Black family’s wealth still ends up 51% less. For equal achievements and equal work, these two composite families experience drastically different outcomes. This paper examines the role of each of these contemporary disparities—from differing returns on college education to unequal home appreciation rates to inheritances, to name a few—in shaping the next 50 years of the racial wealth divide. Our findings indicate the most significant contributors to the racial wealth gap are wage inequality—due to the lack of equitable support in completing a college education as well as post-education workplace discrimination—and differences in asset allocation. Together, these inequalities prevent Black wealth accumulation with 401(k)s and non-retirement investment portfolios at the same rate as their White counterparts. Directly descending from the legacies of slavery and Jim Crow, these differences are dependent both on institutional realities and, to a lesser extent, individual behavior, and emerge in nearly every realm of financial life.