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A recent study indicates that of the 15.2% of Americans 21 and older who own an individual retirement account in their own name, the majority are gainfully employed, white, American, married and male.

Black Americans have the lowest ownership rate and “by far the lowest average account balance,” according to the Employee Benefit Research Institute report.

Hispanics also have a low rate of ownership, but account balances closer to those of their white and other American racial/ethnic counterparts, the study finds.

Varying levels of education is likely the cause of the disparity in ownership, says Craig Copeland, senior research associate at the Washington institute, and author of the report.

Because white, American males generally have “higher income and higher education, they have the money for IRAs and understand the tax advantages,” Copeland says.

He explains that people who are well educated typically take employment at companies that offer retirement plans. When they switch companies, they roll over the retirement money and consequently learn about IRAs.

People who are less well educated often take jobs that pay the minimum wage. Retirement plans generally are not offered and employees “are lucky if they have health benefits,” Copeland says.

But people who earn less and do own IRAs often have account balances “virtually equal to that of those in the second highest” income category, according to the study.

These findings dont surprise Dave Evans, vice president, retirement and financial planning with the Independent Insurance Agents of America in Alexandria, Va. He believes that the fact that minorities own fewer IRAs than whites is “more income-driven than attitude-driven. Someone looking at that can draw an erroneous conclusion that non-whites are not savers.” Evans believes it is actually a cultural norm for certain minority groups to save.

A broker wanting to penetrate this market might try reaching out to members of these groups in their workplaces, he says. Evans says brokers interested in expanding their client base should contact companies in the retail, food and other service industries for permission to market to employees.

“The other idea would be a focused effort by brokers on their own language skills,” he says.

Evans underscores a message of Copelands study by citing the population of California, where he says whites are the minority, as an example of why carriers “not looking to bolster their rosters of minorities are missing a significant opportunity going forward.”

Tariq Khan, assistant vice president of multicultural marketing for MetLife Inc., New York, agrees, saying that MetLife has a strong commitment to serving minority populations.

Khan says its natural to feel comfortable with someone who understands ones language and needs, so companies seeking entrance into the minorities market should employ a culturally diverse sales force.

“MetLife has a very large sales force (nearly 30%) of African Americans and Hispanics who sit face-to-face with clients,” Khan says. “And we have brochures in Spanish, which makes a lot of clients feel more comfortable.”

The recently adopted tax legislation makes it an auspicious time to get into the IRA market, Evans says, because it includes tax credits on contributions made to certain IRAs, which would appeal to people with limited disposable income.

Copeland agrees that the new tax law could prove a boon to brokers in the individual retirement account market, but he notes a different opportunity. His study finds that the percentage of IRA owners who make the maximum contribution is very high. Because of the increase in the contribution limit the new law allows, Copeland says, “brokers can expect the people who currently contribute at the highest level to go even higher now. It seems like theres a lot of potential out there.”

Although the data analyzed in this study is different from similar studies done in the past, qualitatively the results have remained consistent across the demographic groups, Copeland says. The study is done generally every five years.

“I anticipate the numbers [of IRA owners] will get higher because the country is aging,” Copeland says. “IRAs are becoming more popular because of rolling over, and because now you can use IRAs for a first-time home purchase and higher education, whereas before you couldnt, and in general there has been more education of the need for retirement savings.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 20, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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