African Americans and Hispanics are less prepared for retirement than their white and Asian counterparts, according to a survey released today.
African Americans and Hispanics are less prepared for retirement than their white and Asian counterparts, according to a survey released today.
According to the Ariel Education Initiative study, which analyzed 401(k) data from almost 3 million employees from 57 large companies, including many Fortune 500 firms, African-American and Hispanic workers were less likely to participate in their 401(k) plans than white or Asian workers..
The study found that 77% of white employees and 76% of Asian workers contributed to their plans.
Meanwhile, 66% of African-American employees and 65% of Hispanic employees participated in their company’s defined contribution plans.
The Ariel Education Initiative is a nonprofit affiliate of Chicago-based Ariel Investments LLC and Hewitt Associates Inc., a global human resources consulting firm based in Lincolnshire, Ill.
The finding was in line with a study by the Employee Benefit Research Institute of Washington in November 2007, which found a gap between participation of Hispanic and black workers and that of white employees.
The EBRI study found, however, that the gap narrowed at higher earnings levels. The disparity remained in the Hewitt/Ariel study, regardless of income or age.
“Race is the No. 1 predictor of 401(k) plan participation,” said Mellody Hobson, president of Ariel Investments. “Before we thought perhaps it was gender or another factor, but clearly it's race.”
The Hewitt/Ariel study found that among those who save in 401(k) plans, Asian workers have the highest contribution rate, at 9.4% of income, while whites contribute 7.9%; blacks, 6.3%; and Hispanics, 6%.
African-American workers were also more likely than other groups to take loans against their 401(k) plans or take hardship withdrawals.
Fully 39% of African-Americans had taken a loan and 7.8% took a hardship withdrawal. Some 29% of Hispanic employees had taken a loan and 3.4% had mad a hardship withdrawal.
By contrast, 21% of white workers had taken a loan and 2.1% had withdrawn funds, the study found.
The study also found that African-American workers were less likely than other groups to invest in equities.
Jeff Nash is a reporter for sister publication Pensions & Investments.
