How to Close the Savings Gap: What Business and Government Can Do to Address Racial Disparities in Retirement Investing

By Hobson, Mellody | Black Enterprise, October 2009 | Go to article overview

How to Close the Savings Gap: What Business and Government Can Do to Address Racial Disparities in Retirement Investing


Hobson, Mellody, Black Enterprise


WHEN IT COMES TO RETIREMENT SAVINGS PLANS, African Americans and Hispanics participate less often, contribute less money, and take out more loans and early withdrawals than our white and Asian counterparts. Those are among the most eye-opening findings from a study by my company's nonprofit affiliate, Ariel Education Initiative, and Hewitt Associates. We recently partnered with several leading minority organizations to release 401(k) Plans in Living Color: A Study of 401(k) Savings Disparities Across Racial and Ethnic Groups. The study examined the saving and investing behaviors of 3 million eligible African American, Asian, Hispanic, and white workers in 57 of the largest U.S. companies across a variety of industries and sectors. The findings reveal that race and ethnicity play a significant role in investing, showing up in 40l(k) positioning, contributions, and ultimately individual balances.

First and foremost, black and Hispanic workers don't participate in 401(k) plans as much as white and Asian workers do. More than three-fourths of eligible whites and Asians contribute to their 40l(k) plans, but only two-thirds of African Americans and Hispanics do. Among those who save, white employees set aside about 8% of their income, while Hispanics and African Americans commit roughly 6%. Some of these differences result from other factors, but even taking those into account, black savers contribute 11% less than whites. Compounding the problem, we also tap our savings before retirement more often. About 40% of all African Americans and 30% of Hispanics have withdrawn loans against their plans, double the figure for whites. African Americans and Hispanics also are much more likely to take hardship withdrawals than other Americans.

[ILLUSTRATION OMITTED]

African American and Hispanic workers also invest more conservatively, another reason that we generally have lower account balances. African Americans devote 66% of their portfolio to equities; Hispanics allocate 70%, while whites have 72% in stocks. Because stocks boast the highest long-term returns, investors who devote less money to them will grow their money more slowly. The end result is that for workers earning between $30,000 and $59,999, average 401(k) balances are $21,224 for African Americans, $22,017 for Hispanics, $32,590 for Asians, and $35,551 for whites. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

How to Close the Savings Gap: What Business and Government Can Do to Address Racial Disparities in Retirement Investing
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.