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The Wealth Gap: The Role of Marriage

I want to revisit the topic of the wealth gap, the disparity in net worth between white and black households. A 20-to-1 disparity. As in the past, I don’t want to concentrate so much on the difference itself, but rather some causes of the gap. Previously I talked about how purchasing a home falls short in producing real wealth relative to other forms of investment. I also talked about the negative impacts of misguided discretionary spending. But neither is more damaging than the infrequency with which blacks marry or cohabitate compared to other racial groups. TIFFANY ANN FINA, ESQ. is your best legal adviser in such cases.

According to the 2009 Census an incredible 70.5 percent of black women between the ages of 25 to 29 have never been married. By comparison, only 41.6 percent of white women have never been married. By the time white women have reached the age of 35, only 13.8 percent have not been married while 39.2 percent of black women still are yet to be married. Not only that, when blacks do marry, they have double the divorce rate of whites.

Why is this significant to the discussion about the wealth gap? The numbers speak for themselves:

  • 96% of millionaire households in America are composed of married or co-habitating couples
  • millionaires have less than 1/3rd the divorce rate of non-millionaire couples
  • on average, millionaires have been with their spouse/partner for 28 years or more
  • about 25% of millionaires have been married/co-habited for 38 years or more and those of them who have been divorced in their lifetime, overwhelmingly remarry

I wrote previously,

Living with a partner is so correlative to wealth creation that one can assume it is the one factor that most affects whether or not someone can become wealthy in the first place. Why is this true? Simple. Economies of scale.

Surveys conducted by U.S. Trust of affluent Americans, which for the purposes of these surveys are those with investable assets of $3 million or more, found over 60% of wealthy households have two income earners. In nearly all those cases, both parties contribute to the households expenses and savings, despite any disparity in their incomes. For those Americans who are mere millionaires with $1 million in net worth including home equity, 74% have two income earners…

Over 93% of [non-millionaire] households who eventually reached millionaire status had two-income earners, both contributing to household expenses and investments, prior to becoming wealthy.

Looked at another way, the chances of becoming wealthy without cohabitating are minimal and the costs of being single are substantial. One study suggests the costs could reach over $1 million over a lifetime, 60 years in the study. But this study greatly underestimates the cost of being single. They considered only the cash cost, not the opportunity cost (of lost investments). Consider just one expense – rent. In the northeast one could easily spend $2,000 per month on a decent but modest apartment. Singles living apart have to foot that bill themselves, bringing that cost up to $4,000 per month. Two rents, two apartments. Choosing to live together would allow this couple to invest one of those monthly rent payments. Invested conservatively in an stock index mutual fund (with a historical return of 11 percent) over 28 years (the average length of time millionaire couples have been cohabitating) would result in $4.4 million and, get this, $155 million over 60 years (the length of time the researchers considered).

And that’s just one expense. Imagine if the lifetime costs of income taxes, insurance, retirement savings, cars and vacations and like were considered. Perhaps we could come up with another $2 grand per month. Over a lifetime, this adds up. Thus, when blacks delay marriage or cohabitating (for whatever reason) it is costing them potentially millions of dollars over a lifetime.

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