Guest Column
Minorities lag
behind whites in retirement savings
Blacks and Latinos accumulate less in their 401(k) plans than
whites of similar income levels, a study finds. Besides saving too little,
they tend to invest too conservatively.
By Gail MarksJarvis
July 9, 2009
Millions of Americans aren't saving enough for retirement, but African
American and Latino investors, on average, are further behind than whites
and are more likely to be a greater burden to their families because they
save too little and invest too conservatively, new research has found.
"It's extraordinarily disconcerting," said Mellody Hobson, president of
Ariel Investments, which along with benefits firm Hewitt Associates
conducted a study of 401(k) participants.
"No one is doing a good
job preparing for retirement, and [minorities] are doing worse," Hobson
said. She said people do not want to be a burden to their families but are
unknowingly setting themselves up for that.
Although some people
assume that insufficient savings are a result of low incomes, Hobson said
her research indicates the problems come from behaviors such as waiting too
long to start investing, borrowing too much from 401(k) plans and avoiding
stocks.
When researchers compared people of similar income levels,
they found that black and Latino investors accumulated less than whites in
401(k) plans.
Among people earning less than $30,000 a year, African
Americans had on average $3,900 in their 401(k) accounts. Whites at the same
income level had $8,000.
For people earning more than $120,000,
whites had built up average savings of $223,000, while blacks had $150,000
and Latino investors had $154,000.
Hobson said that each group makes
mistakes that hold them back from accumulating the retirement money they
will need. African Americans often assume that they need to be earning about
$100,000 before they can start investing, and whites tend to wait to invest
until they are about 35.
Both approaches undermine people's futures
because saving small amounts early in life is more effective than investing
larger amounts later.
(In accordance with Title 17 U.S.C. Section 107, this material is distributed by HispanicVista.com (www.hispanicvista.com) without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)