Despite headway made in the six years since the landmark Supreme Court ruling on marriage equality, the LGBTQ community can still face significant challenges when it comes to planning and saving for their golden years.
“LGBTQ Americans earn less than heterosexual individuals and potentially face housing discrimination in 21 states,” Joseph Stemmle, CFP and PridePlanners Knowledge Circle host with the Financial Planning Association, told Yahoo Money. “Couple those issues with being historically underserved by the financial industry and you can start to see why the community on average has a lower financial confidence when it comes to long-term financial security and retirement planning.”
The headwinds experienced by LGBTQ members are perhaps toughest on the community's aging population, of which there’s an estimated 3 million over age 50 and that number is expected to balloon to 7 million by the decade’s end, according to SAGE and the National Resource Center on LBGT Aging. One-third of LGBTQ elders live at or below 200% of the federal poverty level, according to a 2010 SAGE study.
The challenges start with paychecks. Prudential’s LGBTQ Financial Experience survey found that the average income for heterosexual males and females is $83,469 and $51,461, respectively, with gays and lesbians under-earning at $56,936 and $45,606, respectively.
Earning less means saving less and LGBTQ respondents said they were less likely to save for retirement with investment tools like savings accounts, 401(k)s, pensions, and stocks, when compared with heterosexuals, the Prudential findings show.
“It’s a negative compounding effect where you're not making as much, so it's hard to save as much to reach your goals," Stemmle said. “Over the long term, when you have less cash flow — because of that job discrimination — it's harder to build out that retirement nest egg."
For those able to save, the years before the Supreme Court ruling on marriage in 2015 resulted in “a lot of money left on the table,” he said because health benefits and pensions weren’t able to be passed along to domestic partners, further siphoning money from LGBTQ individuals and couples.
‘People want to live in communities where they're welcome and accepted’
Prudential found LGBTQ members spend more on necessities (51% to 47%), debt (15% to 14%), and save less in retirement accounts (20% to 25%), with both LGBTQ and the general population allocating 14% of their incomes to discretionary spending.
Also pulling at LGBTQ finances is an extra (and expensive) nuanced set of expenditures like family planning methods such as adoption, assisted reproductive technology, or surrogacy which can total up to five figures, and health care costs to accommodate LGBTQ-specific needs.
Housing isn’t necessarily more expensive for members of the LGBTQ community, but individuals tend to gravitate towards costlier cities where they may feel more accepted and safe.
“People want to live in communities where they're welcome and accepted, and that leads to a higher cost of living,” he said. “If you’re getting paid less and you're living in some of the most expensive cities in the country, that can lead to longer-term issues” that infringe on saving.
The higher living expenses carry into retirement as well.
“A lot of people do lean on their kids and families” when they age, but an “LGBTQ community member may not have that natural group” and instead choose to design their own tight-knit community, Stemmle explained. In fact, LGBTQ members are twice as likely to be single and live alone and four times less likely to have children, according to SAGE.
Some in the LGBTQ community receive additional discriminatory barriers when seeking housing in their older years, Stemmle said. This is why many opt for at-home elder care, which comes at a greater cost, and why more than a third (34%) of LGBTQ elders worry about having to hide their identity in order to access senior housing, according to a 2018 survey from AARP.
“If you don't have a lot of money," Stemmle said, "those [long-term care] policies can be expensive."