The wealth possessed by the typical Black American is a fraction of that possessed by the typical white American.

Closing this gap will take time and effort. It is not a simple topic, and many people politicize the issue, which tends to heighten emotion. I’m not here to tell you what to think about the racial disparity, its importance or possible changes we need to make, but I do hope you will think about it more and possibly in a new way by sharing one of the most interesting papers I have read in years.

The paper is called “Two American Financial Plans,” and it was written by two CFPs, Brent Kessel and Kamila Elliott, and a student at Yale, Ako Ndefo-Haven. They lay out what the gap means for the future if nothing changes. They also describe some key areas where financial planners can help.

Kessel is the co-founder and CEO of Abacus Wealth Partners, a multi-billion-dollar financial advisory firm. Elliott is the president of GRID 202 Partners, a financial planning firm with offices in Washington, D.C.; Georgia; and North Carolina, and she’s also the chair-elect of the board of directors of the CFP Board. Ndefo-Haven studies history and political science at Yale and serves as an editor on the managing board of the Yale Daily News.

The authors take national data about the wealth gap and run it through financial planning software. Among other things, they look at differences in income; student loan balances and interest rates paid; home purchase amounts and mortgage considerations; business equity and growth; and 401(k) plan balances and contribution rates; as well as non-retirement account data.

The authors use a probability weighting to refine the inputs and produce a picture of what the lifelong financial effects of present-day disparities could look like in the future. As one might expect, differences in inputs create vastly different outcomes.

The paper presents the plan for two hypothetical couples of the same age—a Black couple, Michael and Ashley Jones, and a white couple, Chris and Emily Williams. By 2064, the Jones family has a net worth that’s 70% less than that of the Williams family. That’s also the year Michael Jones is expected to die, according to current life expectancy tables.

The paper is extensively documented. The appendix has 11 pages citing the works referenced, and there are an additional 16 pages of 253 reference notes. The sources run the gamut from academic studies to for-profit entities to the Federal Reserve.

Some of the reasons for the wealth gap are interrelated. Earning more money makes a significant difference because, among other things, it allows for more savings. The authors offer seven pages of explanations for their various calculations and methods to describe their approach and how they dealt with interrelated factors.

The paper delves into each input for the couples’ financial plans. Take, for instance, education. The plan assumes that the Joneses have more student debt (and pay a higher interest rate on that debt) than the Williamses. Given the studies cited, this is a fair assumption, and the calculation is well described.

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