A comprehensive examination of 401(k) saving and investing behaviors of African-American, Hispanic, Asian and white employees finds African-American and Hispanic workers are “significantly” less prepared for retirement than their White and Asian counterparts.
Regardless of age or income, African-American and Hispanic workers have lower participation rates and contribute less to their 401(k) plans, according to a study from Ariel Investments and Hewitt Associates. As a result, their 401(k) account balances are negatively impacted and chances for a comfortable retirement significantly compromised.
The Ariel/Hewitt Study analyzed 401(k) information for nearly 3 million employees across 57 large, primarily FORTUNE 500 companies in the U.S. It was conducted by the Ariel Education Initiative, the nonprofit affiliate of Ariel Investments, and Hewitt Associates, a global human resources consulting and outsourcing company. 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 also participated. The study was funded with a grant from The Rockefeller Foundation.
In response to the study, Mellody Hobson, president of Ariel Investments, remarked, “401(k) plans are now the primary way Americans save for their golden years. 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.”
The results of the study show two-thirds (66 percent) of African-American employees and 65 percent of Hispanic employees participate in their company’s defined contribution plans, compared to 77 percent of white workers and 76 percent of Asian workers. Even after adjusting for factors such as age and income, the disparity remains.
Additionally, African-Americans and Hispanics contribute to their 401(k) plans at much lower levels than their white or Asian counterparts. Among those who save, white employees contributed 7.9 percent of income, compared to Hispanic and African-American workers, who contributed 6.3 percent and 6.0 percent, respectively. At 9.4 percent, Asian workers had the highest contribution rate of all groups.