Wednesday, July 24, 2024

Blacks, Hispanics save less through 401(k) Plans than White Counterparts

According to a study conducted by the Ariel Education Initiative and funded by the Rockefeller Foundation, fewer African-Americans and Hispanics participate in 401 (k) plans, and those that do contribute less than their white counterparts. The study, which is the largest and most comprehensive examination of 401(k) saving and investment behaviors, is based on an analysis of nearly 3 million employees across 57 large, primarily Fortune 500 companies in the United States.

Some of the findings of the study include:

*66 percent of black employees and 65 percent of Hispanic employees participate in their company’s contribution plans, in contrast to 77 percent of white workers and 76 percent of Asian workers.

*Among those that save, blacks contributed 6 percent of their income, compared to 6.3 percent by Hispanics and 7.9 percent by whites and 9.4 percent by Asians.

*Blacks and Hispanics also are more likely to have a loan from their 401(k) plans than their white counterparts. Thirty-nine percent of blacks have taken such loans and 29 percent of Hispanics while only 21 percent of whites and 16 percent of Asians have done so.

*Blacks are also more likely to take “hardship withdrawals”.  7.8 percent do so, compared to 3.4 percent of Hispanics, 2.1 percent of whites and 2 percent of Asians.

*Blacks are less likely to invest in equities. They invested 66 percent of their 401 (k) assets in equities, compared to 72 percent for whites, 73 percent for Asians and 70 percent for Hispanics.

*Black and Hispanic workers had lower average account balances. Among workers earning between $30,000 and $59,999, blacks had an average balance of $21,224, Hispanics $22,017, Asians $32,590 and whites $35,551.

*Among workers who earn $120,000 or more Hispanics had an average balance of $150,456, blacks $154,902, Asians $161,259 and whites $223,408.

Mellody Hobson, president of Chicago-based Ariel Investments said, “This study reveals important differences that must be addressed if retirement security is to be a reality for all Americans. Without a significant effort to improve savings and investing behaviors, African-American and Hispanic workers are in danger of retiring into poverty.”

Groups that participated in the study included the Chicago Urban League, the Joint Center for Political and Economic Studies, the National Council of La Raza, the National Urban League and the Raben Group.

Chicago Sun-Times