A new approach to financial wellness for LGBTQ+ employees 

  • Author
    Jillian Kennedy
    Partner, Leader of Defined Contribution and Financial Wellness, Mercer Canada
  • Author
    Harrison Pope
    Client Manager and Commercial Strategist, Mercer Global Pride Co-Chair

This Pride month, it’s time to address systemic biases that put the economic health of LGBTQ+ workers at risk.

Employers can adopt a new approach — untethering programs from an outdated framework of “traditional life milestones.” By embracing flexibility, personalization and support, employers can position their LGBTQ+ employees — and their entire workforces — to build wealth, save for retirement and thrive.

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. Until 2023, Japan had no legal protections against discrimination on the basis of sexual orientation and gender identity. Furthermore, in a recent survey, 42% of respondents reported having experienced non-inclusive behaviors in a work context, with just under half saying they are certain they experienced them as a result of their sexual orientation or gender identity.

47%

of LGBTQ+ Canadians households own their homes

94%

of LGBTQ+ Australians are feeling the strain of financial stress

42%

of global survey respondents report having experienced non-inclusive behaviors in a work context

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?

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.

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.

In the US, where research is readily available, studies have shown that LGBTQ+ employees have:

Less access to employer-sponsored savings programs 

Twenty-eight percent of LGBTQ+ workers don’t have access to an employer-sponsored retirement or savings plan, such as a 401(k), while 9% do have access but opt not to contribute. In fact, only 47% of LGBTQ+ adults have a retirement savings option of any kind, compared to 56% of the general population.

Less access to advice and education‚ especially for women

There is a shortfall in financial advice that is available to, or relevant to, LGBTQ+ workers. More than 30% of LGBTQ+ women and 25% of LGBTQ+ men say they aren’t sure how to evaluate their financial options, and more than 40% of LGBTQ+ women say they lack a trusted financial advisor.

Lower confidence in their financial decisions 

Only 49%, compared to 61% of non-LGBTQ+ Americans, say they understand their financial options “very well.” They are significantly less confident than their peers in their ability to choose suitable investments for their own financial health.

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.

80%

heterosexual

3%

gay or lesbian

4%

bisexual

1%

pansexual or omnisexual

1%

asexual

1%

other

*11% of people don't know or won't say
Many of these individuals aren’t “out” to their employers. Older generations and individuals in regions with fewer protections are less likely to openly identify as LGBTQ+ due to a long history of liminality and lingering discrimination, workplace microaggressions, and even criminalization of the community. Risks and inequities inhibit both people’s behavior and accurate data collection — especially in areas where state-sponsored persecution still exists.

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. 

Employers must consider all employees as individuals — creating flexible programs and resources to help them attain better financial wellness.

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

As we’ve outlined above, LGBTQ+ employees face a unique set of factors that inhibit their ability to accumulate wealth. To understand these barriers better and begin to dismantle them, it’s helpful to briefly unpack what they are.

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.

Studies show that LGBTQ+ individuals often have different spending habits and priorities than their heterosexual or cisgender peers — important to keep in mind before making assumptions about financial goals. LGBTQ+ people are more likely (60%) than non-LGBTQ+ people (53%) to say that “being or becoming rich is not a priority for me.” Instead of buying a home or car, they are more often saving for a vacation or to grow a business.

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   

Keeping these common barriers to wealth for LGBTQ+ employees in mind, companies can begin to rethink their approaches to financial wellness. 
Employers often look at an employee’s financial health as a static progression of steps — making assumptions about where employees must be on their journeys based on things like age, gender or career stage.
We’ve identified four stages of financial wellness through which employees must progress sequentially. We recommend using this framework for evaluating your organization’s financial wellness efforts:
  • 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

As you look for concrete steps to begin to meet the needs of your LGBTQ+ employees — and, by extension, the entire workforce — here are five areas to consider:

According to Mercer’s 2022 Inside Employees’ Minds study, fewer than half of respondents (46%) feel confident they can turn their retirement savings into a consistent stream of income to last the rest of their lives. If a one-size-fits-all approach worked, employees would be more confident about their retirement and savings. Because employees are so diverse and complicated — and at so many different stages of financial aptitude — employers must create a range of resources that allow them to self-select according to their own needs.

Without guidance, people may be overwhelmed and intimidated by the abovementioned flexibility. Mercer research has found that employees’ perceptions of their financial literacy are more important than their actual levels of financial literacy in achieving financial wellness. Those who have a more favorable self-rating of their financial knowledge are more likely to engage with a financial advisor, seek guidance and improve their financial wellness. Create tools and strategies that focus on helping employees — LGBTQ+ and not — to build more financial courage. Offer outreach and education at varying levels to help employees build this courage.

Workplace savings and financial education plans too often focus on long-term financial goals and neglect pressing short-term challenges. Employers tend to focus more on Stage 3, in the section above, but more attention needs to be applied to Stages 1 and 2 to ensure employees are on stable footing. For many employers, this puts the spotlight on programs such as HSAs, student loan employer-matching-contribution programs and retirement contributions. Unsurprisingly, these topped the list of employee financial planning priorities in our 2022 Inside Employees’ Minds study.

Employees often need comprehensive financial wellness resources not currently available through EAPs, so it’s not enough to check the box with an EAP and assume you’ve adequately provided for their needs. Our 2018 Inside Employees’ Minds Canada research has shown that employees are far more likely to trust outside sources, such as banks and personal financial advisors, than employers. This is particularly important for LGBTQ+ workers, who are seeking like-minded advisors or financial mentors they see as allies. However, this principle holds equally true for other groups, such as people of different races/ethnicities and women.

We devoted a section to this earlier, but we cannot emphasize it enough. Let go of the idea of a monolithic series of milestones in an employee’s life. Those milestones simply don’t apply to everyone anymore. As more and more people choose alternative paths and evaluate their stability and success through the lenses of different values, we must challenge this idea of traditional milestones and instead opt for a more flexible approach to benefits and the employee value proposition.

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.

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Jillian Kennedy
Harrison Pope
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