Unequal Returns: Education Fails to Fully Prepare Black and Latino Americans for Retirement.

Background: Retirement is a universal life stage, marking the culmination of an individual's working years. However, many people face financial challenges during retirement due to insufficient financial planning. Retirement preparedness is essential for ensuring economic security and maintaining a high quality of life in later years. Education is often viewed as a key driver of retirement preparedness, as it is linked to higher earnings, better financial literacy, and improved decision-making. However, the Minorities' Diminished Returns (MDRs) theory suggests that the economic, cognitive, and behavioral benefits of education are weaker for racial and ethnic minorities compared to non-Latino Whites. Objective: This study aims to examine the relationship between educational attainment and retirement preparedness, focusing on whether this association differs among Black, Latino, and non-Latino White individuals, using data from the Understanding America Study (UAS). Methods: Data were drawn from the UAS, a nationally representative internet-based panel survey. The sample included participants from diverse racial and ethnic backgrounds. Linear regression models were used to evaluate the association between educational attainment, measured in years of schooling, and retirement preparedness. Interaction terms were included to test whether the association varied by race and ethnicity. Models were adjusted for potential confounders, including age, sex, marital status, employment status, and immigration. Results: In the overall sample, higher educational attainment was significantly and positively associated with better retirement preparedness (p < 0.001). However, consistent with the MDRs framework, the strength of this association was significantly weaker for Black and Latino participants compared to non-Latino White participants (p < 0.05). Non-Latino Whites with higher education levels reported substantially better retirement preparedness, while the same level of education yielded smaller gains in retirement preparedness for Black and Latino individuals. Conclusion: The findings support the Minorities' Diminished Returns theory, showing that although educational attainment enhances retirement preparedness for all groups, Black and Latino individuals derive fewer benefits compared to their non-Latino White counterparts. These disparities point to persistent structural inequalities and systemic barriers within the education system and labor market, as well as the effects of segregation and discrimination, which undermine the economic benefits of education for marginalized populations. Addressing these disparities requires targeted policy interventions aimed at eliminating racial and ethnic inequalities in retirement outcomes and ensuring equitable benefits from educational attainment for all groups.