--- title: This Analysis Shows How the Rich and White Benefit Most From Retirement Account Tax Breaks description: Tax breaks in the U.S. retirement tax system for 401(k)s and IRAs and continues to favor the rich and white over Black and Hispanic savers. authors: - name: Mallika Mitra role: Contributing Editor url: https://money.com/author/mallika-mitra/ bio: Mallika Mitra is a contributing editor for Money, based in Chicago. She has covered investing and retirement for seven years and her work has appeared in CNBC, Bloomberg, Kiplinger, AARP, Barron’s, Bankrate, The Daily Upside, ETF.com, The Bond Buyer, PLANADVISER, PLANSPONSOR and Investopedia. education: Craig Newmark Graduate School of Journalism at CUNY Kalamazoo College at_money_since: 2020 articles: 395 covers: - Retirement - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Shopping - Taxes - Technology also_seen_in: - CNBC - Bloomberg - Kiplinger - Barron's - Bankrate - WGN-TV - CBS News Radio - This Morning With Gordon Deal - Everyone's Talkin' Money social: - https://twitter.com/mitra_mallika - https://www.linkedin.com/in/mallika-mitra-4577a386/ published: '2021-08-25T17:51:10.000Z' modified: '2024-01-10T16:45:37.000Z' section: Retirement tags: - News word_count: 411 canonical: https://money.com/401-k-ira-retirement-tax-breaks-race-gap/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Collage of a hand putting a one hundred dollar bill into a velvet coin purse](https://img.money.com/2021/08/News-Unfair-Retirement-System-Favors-Whites.jpg) The tax breaks in retirement accounts like [401(k)s](https://money.com/401k-and-401k-rollover/) and [IRAs](https://money.com/what-is-an-ira/#:~:text=An%20IRA%2C%20or%20individual%20retirement,than%20a%20401\(k\).) are making racial inequities worse in the U.S., according to a new analysis. The gap between white and Black and Hispanic families' average retirement account balances widened significantly over the last 30 years, partly because of the tax breaks, according to an analysis by the nonpartisan [Tax Policy Center](https://www.taxpolicycenter.org/taxvox/retirement-tax-benefits-exacerbate-racial-inequities-0?&utm_source=%20urban_newsletters&utm_medium=news-DD&utm_term=TPC) of the Federal Reserve's most recent Survey of Consumer Finances. In 2019, white families on average had an account balance of $168,500, not including traditional employer pension plans, up from just under $35,000 in 1989. Black families, by comparison, had an average account balance of $38,300 in 2019, and for Hispanic families, it was just $27,300. Back in 1989, account balances for these groups averaged around $7,000. On top of the stark difference in the size of account balances, the study found a disproportionately higher number of white households even had savings in retirement accounts at all. Some 57% of white families had savings in retirement accounts as of 2019, compared to 35% of Black families and 26% of Hispanic families. These figures have all increased — up about 14 percentage points since 1989 for white families, versus 18 for Black families and 10 for Hispanic families — but people of color still lag behind significantly. Over time, Congress has upped the tax benefits for retirement savers. But those benefits have disproportionately helped those who have extra money to put aside in retirement savings accounts — a.k.a. high-income households, which are mostly white, the center added. “We have an upside-down retirement system,” says Steve Rosenthal, senior fellow at the Tax Policy Center and author of the analysis. “We’re rewarding those who already save.” So what can be done to fix the flawed system? Automatic enrollment in retirement savings plans and automatic contribution increases would help, according to [Wealth After Work: Innovative Reforms to Enhance Retirement Security](https://money.com/pr/x2d75ec391ad?durl=https%3A%2F%2Fwww.amazon.com%2FWealth-After-Work-Innovative-Retirement%2Fdp%2F0815739346%3F%26linkCode%3Dll1%26tag%3Dmoney01f7-20%26linkId%3Db3783d80ee264f3e8fa96b8f170a9e66%26language%3Den_US%26ref_%3Das_li_ss_tl&ca_referer=%2F401-k-ira-retirement-tax-breaks-race-gap%2F&ap_referrer=%2F401-k-ira-retirement-tax-breaks-race-gap%2F), a new book that includes the co-director of the Tax Policy Center as one of its [editors](https://www.taxpolicycenter.org/taxvox/how-can-retirement-system-help-more-people-afford-retirement). According to one of the book's recommendations, if an employer doesn't sponsor a retirement savings plan, it could be forced to automatically enroll employees in an IRA and make contributions to it, encouraging workers to save for retirement. 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