Study: Racial Gaps Hurt Retirement Plans

By Chris Hoenig


When it comes to retirement readiness, race and ethnicity matter. And according to a new study, whites are the most prepared.

Research from the National Institute on Retirement Security found that more than 60 percent of white households own assets in a retirement account, while more than 60 percent of Blacks and nearly 70 percent of Latinos do not—and those who have plans have far less in them than their white counterparts.

The average retirement savings for white Americans near retirement age is four times that of Blacks and Latinos ($120,000 vs. $30,000). Roughly 75 percent of working-age (25- to 64-year-old) Black and 80 percent of working-age Latino households have less than $10,000 in their retirement accounts, which include both 401(k) and defined-benefit (DB) pension plans, compared to only about half of whites.

Putting money into these plans is generally easier for whites—62 percent of working-age whites are enrolled in an employer-sponsored retirement plan, while only 54 percent of Blacks and Asians and 38 percent of Latino employees have a 401(k) or DB pension sponsored by their workplace. The racial gaps are greater in the private sector than in public-sector jobs: Blacks are 15 percent less likely than whites to work for a private-sector employer that contributes to their retirement plan, and 10 percent less likely than whites in the public sector. Asians face similar disparities (13 percent in private versus 9 percent in public jobs). But Latinos face the greatest disparities of all—they are 42 percent less likely than whites to have a private-employer-sponsored plan and 12 percent less likely in the public sector.

I’m alarmed by the severity of the retirement racial divide,” said study author Nari Rhee, Ph.D., Manager of Research at NIRS. “It’s well documented that regardless of race, the typical working-age American household is far off track toward accumulating sufficient savings to meet their basic needs in retirement. As we dig deeper into the data, we find an even worse situation for Blacks, Latinos and Asians.

“With low access to retirement plans and low wages, what we’re ultimately seeing is little if any retirement savings among people of color.”

The long-term effects of the research are likely to be felt by taxpayers, both now and in the future. “With little else to depend on besides Social Security when they retire, people of color are especially vulnerable to reliance on public assistance and economic hardship in old age,” Rhee said. “Our research makes it clear that placing a special focus on improving the retirement readiness for Americans of color is absolutely essential to solve the national retirement crisis.”

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