Also read: financial literacy, debt, employee benefits, diversity studies, retirement
Despite income levels and age, Blacks and Latinos in corporate America participate at lower rates and contribute less to their 401(k) plans than their white and Asian colleagues, a new study by Ariel Investors and Hewitt Associates has found.
The study, "401(k) Plans in Living Color: A Study of 401(k) Savings Disparities Across Racial and Ethnic Groups," surveyed nearly 3 million employees across 57 primarily Fortune 500 U.S. companies and found that Blacks remain undereducated about saving for retirement and, therefore, underutilize the employee benefit.
Click here to read "Think You're Saving Enough? Think Again."
Click here to read "Now's the Time for Young Professionals to Save for Retirement."
Click here to read "Are You a Prime Candidate for Job Burnout?"
According to the study, only 66 percent of Black employees and 65 percent of Latino employees take advantage of their companies' "defined contribution plans" compared with 77 percent of whites and 76 percent of Asians. And despite advisement by investment experts, only 66 percent of Blacks invest 401(k) assets in the stock market compared with 72 percent of whites and 73 percent of Asians.
"[The 401(k) plans] are now the primary way Americans save for their golden years," Mellody Hobson, president of Ariel investments, says. "Most are unaware there are significant savings disparities in 401(k) plans across racial and ethnic groups. This study reveals important differences that must be addressed if retirement security is to be a reality for all Americans."
"These statistics are troubling because loans and withdrawals jeopardize long-term financial security to satisfy immediate needs," says Barbara Hogg, principal at Hewitt Associates. "The impact is heighted during an economic downturn, when unemployment rises and withdrawals and loan defaults increase. We now realize this risk is magnified for African-American and Hispanic workers based on the results of our study."
But it's not all about the employees, suggest researchers. Employers must also look at how they're motivating employees to save. "People today want to know the relevance," Hogg says.
Here are highlights from the study:
· White employees contribute, on average, 7.9 percent of their annual income to 401(k) plans; Latinos and Blacks contribute 6.3 percent and 6 percent, respectively.
· On average, 77 percent of white employees participate in a company-sponsored retirement program versus 66 percent of Blacks and 65 percent of Latinos.
· Employees who earn between $30,000 and $59,999 show significant differences in 401(k) account balances. Blacks, on average, had annual balances of $21,224, while Latinos saved $22,017 a year, compared with the $35,551 whites saved.
Click here for the full study.
Readers' Comments
