01 June 2023
The LGBTQ+ community faces unique barriers to financial wellness
The past decades have improved many aspects of life for members of the LGBTQ+ community around the globe. But building financial health takes years of investment that the community hasn’t had, and bias is deeply ingrained in both our institutions and our ways of thinking around money. LGBTQ+ workers are facing a looming crisis of financial well-being that many employers have yet to see and acknowledge — but must confront.
When compared with their non-LGBTQ+ peers, LGBTQ+ individuals face significant challenges with regard to creating long-term financial wellness, saving for retirement and accumulating generational wealth. In fact, nearly two-thirds of LGBTQ+ Americans say they typically live paycheck to paycheck, with 52% having less than US$10,000 in personal savings — compared to 43% overall.
LGBTQ+ Americans are also weighed down by more debt. They carry more student loans, personal loans and credit card debt than Americans overall. However, they are less likely to have “good debt,” such as mortgages or auto loans that signal the accumulation of assets. According to Motley Fool data, only 26% of LGBTQ+ Americans have a mortgage, compared to 40% of the overall population.
Although these numbers aren’t closely tracked in every region around the globe, the trends hold true. In Canada, only 47% of LGBTQ+ households own their homes, versus 69% of the general population. A 2023 survey found that 94% of LGBTQ+ Australians are feeling the strain of financial stress, compared to 85% of non-LGBTQ+ respondents. In Japan — the only member of the G7 not to recognize same-sex unions — more than 40% of LGBTQ+ individuals say they have experienced harassment and bias while simply looking for employment.
of LGBTQ+ Canadians households own their homes
of LGBTQ+ Australians are feeling the strain of financial stress
of Japanese LGBTQ+ people have experienced harassement
Barriers to financial wellness often start with disparities in pay. In the UK, annual earnings are £7,000 lower for LGBTQ+ coworkers. In the US, LGBTQ+ workers earn about 90 cents for every dollar the typical worker earns, and in Canada, researchers have found similar significant pay gaps. LGBTQ+ people of color, transgender women and men, and nonbinary individuals earn even less.
Lower earnings mean less savings, which is proving to be a gathering storm as the “Stonewall Generation” of baby boomers begins to retire and age. Studies show that LGBTQ+ Americans are less likely to have a retirement account, nonretirement investing account, life insurance, health insurance or disability/critical illness insurance than non-LGBTQ+ Americans. Similarly, a 2017 study found that 37% of LGBTQ+ people had no life insurance compared with 25% of the general population in the UK.
The role of employers in creating financial equity
As most employers know, financial wellness is an essential component of total employee well-being for all employees, not just LGBTQ+ workers. A lack of financial knowledge and preparedness is a society-wide problem. Globally, one in five people say they will never be able to retire. Our own Mercer research has shown that employees spend an average of 13 hours per month worrying about money.
In this way, members of LGBTQ+ communities are no different from their non-LGBTQ+ peers. They share the same concerns and worries: How can I save for retirement? Will I have enough money to retire? Can I afford to buy a home or raise a family? How can I afford to send my child to college?
That said, the need for more employer assistance for the LGBTQ+ community — like other marginalized groups, such as women and people of color — is acute. For example, Mercer’s research has shown that a gender pension gap exists in every retirement income system around the world. These gaps are compounded for those who have an intersection of one or more identities.
One thing all these underserved groups have in common is that they’ve suffered disproportionately from a legacy of bias. They have been underserved by financial wellness programs that were never calibrated to their needs and that have actively impeded their ability to seed wealth effectively. These programs leave them progressively worse off as they have no investments to mature.
These gaps in programs, educational resources and advisory are places where employers can and should step up.
But let’s acknowledge the elephant in the room: Meeting the wide spectrum of needs in the LGBTQ+ community comes with its own inherent challenges. For instance, how can employers always know who these employees are — or what, specifically, they require to thrive?
A spectrum of identities, a spectrum of needs
LGBTQ+ workers are not a monolith. Targeting policies to serve them better is complicated by a lack of data, a persistent legacy of privacy and safety concerns, and a widely diverse spectrum of needs. After all, this community is itself a composite of many different and often unrelated cohorts across sexuality, gender and identity. The needs of a married, cis, gay man entering retirement age will be very different from those of a single, straight, trans individual just starting their career.
Globally, 80% of individuals identify as heterosexual, whereas 3% identify as gay or lesbian; 4% as bisexual; 1% as pansexual or omnisexual; 1% as asexual; and 1% as “other.” Another 11% don’t know or won’t say.
gay or lesbian
pansexual or omnisexual
Organizations cannot make assumptions about who in their workforces may belong to this community. This makes it virtually impossible to know how programs might be impacting LGBTQ+ employees unequally or disproportionately. There is still much we don’t know — and without an accurate probability sample, precise characterization of this population is difficult.
Our lack of demographic data is further complicated by simple human nature. When it comes to financial data, many people experience a sense of shame around financial hardship. They’re embarrassed about not engaging in the saving or investing behaviors that we all know are effective but that many in the LGBTQ+ community have been unable to practice.
Rethinking milestones to fit more diverse life experiences
Traditionally, employee benefits have been structured around assumed life milestones, such as education, marriage, home purchase and raising a family. This structure hasn’t connected with a majority of LGBTQ+ employees and has effectively excluded them. Even in an age of dawning marriage equality, only about one-third of LGBTQ+ millennials say they’re likely by age 40 to achieve the “stereotypical” American dream of owning a home, getting married, having kids, landing a good job and investing in a 401(k) — compared with nearly half (49%) of straight millennials.
Although college graduation tends to be cited as an important milestone by all, the other most impactful life events for LGBTQ+ respondents in a recent US Bank Survey were “coming out” and “achieving financial independence” — compared with “marriage” and “childbirth” for non-LGBTQ+ adults.
An important takeaway here is that employers don’t necessarily need to know who is a member of the LGBTQ+ community to be able to meet their needs in an equitable way. And traditional milestones are no longer a tenable or fair framework for approaching financial wellness. Yet they still underpin how companies offer benefits, and they confine our thinking around how we accumulate wealth — leaving more and more of today’s workers out.
Employers must consider all employees as individuals — creating flexible programs and resources to help them attain better financial wellness — with guidance and education that employees can self-select according to their needs.
What is employee financial wellness?
Let’s take a quick step back and look at exactly what employee financial wellness is and what barriers must be dismantled.
At Mercer, we define financial wellness as a focus on engaging employees throughout their lives and guiding them toward action. This means helping employees save money to reach their specific milestones and goals.
Such a focus includes, but is not limited to, helping employees:
- Earn equitable, appropriate and adequate wages
- Accumulate savings, prosperity and wealth
- Ensure good quality of life
- Attain home and asset ownership
- Increase their ability to plan and save for retirement
- Plan for family, education and caregiving
- Acquire affordable healthcare
- Obtain life insurance, survivor benefits and estate planning
- Manage financial stress
Seven challenges to financial wellness for LGBTQ+ people
Globally, Pew research has found a double-digit increase in acceptance of homosexuality among many countries between 2002 and 2019. But in many areas of the world, including places in Asia and Africa, just being LGBTQ+ puts a person’s life in danger.
Coming out at work is still seen as risky, even in more liberal places. In Europe, fewer than half of LGBTQ+ people are open about their sexual orientations or gender identities, and as of 2021, 50% of LGBTQ+ employees in the US are still not out to their immediate supervisors. More than a quarter aren’t out to any coworker.
Even when they are out, many LGBTQ+ workers say they’ve had trouble accessing or utilizing employer-sponsored benefits for their dependents or beneficiaries. In a recent NEFE survey, one-third of LGBTQ+ respondents say they feel blocked or discouraged from engaging with financial services and products due to barriers or discrimination.
Many LGBTQ+ individuals experience conflict and rejection from family members. A Lending Tree survey found that only 39% of LGBTQ+ respondents feel wholly accepted by their families, with 33% having been kicked out of their homes. For example, LGBTQ+ youth currently account for 24% of the UK’s youth homeless population. In a European study, more than half of respondents say they aren’t open about being LGBTQ+ to their family members. Even in China, where families are smaller, non-LGBTQ+ family members have an 11.1% rejection rate toward LGBTQ+ family members.
Cut off from emotional and financial support as they come of age and throughout their lives, LGBTQ+ individuals are more likely to have debt — and higher debt — than their cisgender, heterosexual peers. In fact, student debt has stopped 87% from reaching key financial milestones, including homebuying (41%), moving out (27%), buying a first car (23%), starting a family (19%) and getting married (18%).
Because these are often lifelong rifts, exclusion from inheritance and lack of generational wealth transfers are common in such families. Instead, LGBTQ+ individuals are more likely to seek community and care in chosen families — a construct that is rarely, if ever, accounted for in traditional financial planning or benefits administration.
European Union law doesn’t protect LGBTQ+ citizens from housing discrimination. In the US, according to a NAR/Freddie Mac study in 2021, 27 states do not offer housing protections for the LGBTQ+ population. In an Equaldex analysis of 232 countries and territories, only 99 provide protection against housing discrimination for LGBTQ+ citizens. Small wonder there is an epidemic of homelessness for younger members of this community — and a persistent lack of housing stability into adulthood.
This lack of protection causes rampant bias; 15% of LGBTQ+ people report being prevented or discouraged from renting or buying a home. Same-sex borrowers experience 3%–8% lower mortgage approval rates and higher interest and/or fees. And the story is similar worldwide. In Singapore, where homosexuality has only recently been decriminalized, LGBTQ+ adults have delayed and diminished access to the subsidies that 80% of Singaporeans use to afford their homes.
Faced with systemic inequality, LGBTQ+ adults often choose to live in communities with high concentrations of LGBTQ+ people, which have served as historical safe havens. But these areas come with a higher standard of living — expensive and gentrifying, they tend to price out LGBTQ+ residents and impact their ability to save.
Compared to their heterosexual and cisgender peers, LGBTQ+ seniors tend to have fewer options for informal aging care. They are more likely to be single or living alone and less likely to have children to care for them. Studies find that resilient LGBTQ+ older adults often rely on their chosen family, community organizations and affirmative religious groups for care and support.
LGBTQ+ elders are at risk of being turned away from or charged higher rents at independent or assisted living centers as well as harassed, treated poorly or forced to go back into the closet. Only 18% of senior housing communities have policies prohibiting discrimination based on sexual orientation or gender identity, and in the UK, a recent survey found that many people in care homes feel they cannot be open about being LGBTQ+ and are scared.
LGBTQ+ employees also face global health inequality — with a higher risk of mental and physical health issues and a higher cost of healthcare. Health plans often lack access and support for LGBTQ+ people, including appropriate provider networks, birth control, family-building resources, gender-affirming care, care navigation, HIV medication for prevention and treatment, and more.
This higher cost of care has a direct correlation with a lower standard of care, as LGBTQ+ adults are more than twice as likely as non-LGBTQ+ adults to report that they’ve “postponed or not tried to get needed medical care” when sick or injured because they couldn’t afford it.
There are fewer educational resources available that fit the needs of the LGBTQ+ population — and that lack of inclusion has resulted in an overall lack of financial literacy. Now, less than 50% of LGBTQ+ Americans feel ready to make major financial decisions, such as paying off debt, building a rainy-day fund, buying a home, planning retirement or investing.
LGBTQ+ Americans are more likely to say financial companies don’t understand how to help them with their unique retirement and financial planning needs. When they do work with a financial advisor, 63% of LGBTQ+ Americans prefer one who is a member of or an ally of the LGBTQ+ community.
The four stages of employee financial wellness
Stage 1: Gaining control over day-to-day finances
At this stage, people have a negative relationship with money and are in a spiraling loop of constantly trying to get control of finances. More of your employees than you realize might be in this stage — where they are living paycheck to paycheck.
At Stage 1, employees need help with:
- Managing stress
- Basic budgeting
- Debt management
Stage 2: Being prepared for the unexpected
At this stage, people are keeping their heads above water but need to establish an emergency fund as a cushion against unexpected expenses. Unexpected emergencies might include health issues, divorce, legal issues or property damage — where a bill of $400 can make the difference between being prepared or slipping back to Stage 1.
At Stage 2, employees need help with:
- Establishing an emergency fund for resilience
- Building their savings
- Basic financial literacy and financial counseling
Stage 3: Getting on track to meet financial goals
At this stage, people are feeling more stable in the present and looking at their future quality of life. This includes goal-setting and financial engagement for planning big future purchases or saving for retirement. This is usually where traditional company financial benefits tend to be focused — but it’s important to realize that a majority of people are not here yet. Don’t jump to Stage 3 without putting resources in place to help employees with the first two stages, or you’ll leave many feeling confused, frustrated and excluded.
At Stage 3, employees need help with:
- Setting up retirement savings
- Making investments
- Investment and long-term advice
Stage 4: Attaining financial freedom
This stage is where people have excess capital for wealth and estate management. Offer resources that help them to progress and grow.
At Stage 4, employees need help with:
- Engagement in advanced financial planning
- Estate planning
- Holistic advice
Rethinking employee financial wellness: Five action areas
Invest in brighter futures for LGBTQ+ workers — and your entire workforce
As you observe Pride Month this June and celebrate your LGBTQ+ colleagues at work, be sure you’re also taking these tangible actions to support their long-term financial health and to help them thrive throughout the year.
By adopting a more flexible, employee-driven approach to financial wellness in your organization, you can help redress some of the damage of past discrimination and diffuse the stigmas and shame that hold people back in their financial development.
For most companies, this means rethinking assumptions you may not even realize you hold. Meet employees where they are, and ensure that your financial programs and benefits are inclusive of everyone. In letting go of those traditional milestones and preconceived ideas about where employees should be and what they should want, you can better meet the unique needs and journeys of not only your LGBTQ+ employees — but your entire workforce.