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Ariel Investments: African-Americans Lag in Retirement Planning, Accumulation

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One area of the retirement planning population has been hit particularly hard by the recession. Middle-class African-Americans are more likely than white investors to have curtailed their saving and investing in order to make it through the economic crisis, according to the 2010 Ariel Black Investor Survey from Ariel Investments. The Chicago-based mutual fund company also found nearly half of all African-American investors dipped into savings to make ends meet in the last two years (compared to 31% of white investors).

“In times of economic hardship, people have to make difficult decisions,” said Mellody Hobson, Ariel’s president, in a statement. “Unfortunately, the resulting trade-offs mean many in [the African-American] community are slipping even further behind.”

Additionally, 27% of black investors who participate in a 401(k) reduced the amount they contribute per month (compared to 16% of white investors), and 22% of non-retired black investors borrowed or withdrew money from a retirement account (compared to 14% of white investors). Even after controlling for various socio-economic factors, black investors are nearly twice as likely to have reduced their contributions to 401(k) plans relative to white investors.

The median amount black investors contribute to their retirement plans is $230 per month, compared to $337 a month contributed by white investors. The median assets black investors have accumulated in their current retirement plans is about half the amount white investors have accumulated: $56,000 compared to $106,000.

Since 1998, the survey has consistently found black investors save and invest less than white investors of similar income levels. This year, the median amount black households reported saving on a monthly basis is $189, compared to $367 among white households. The 2010 findings mark the first time in a decade that African-American households have reported saving less than $200 per month.

According to the company, the survey suggests a sober realization of changed circumstances. In past surveys, African-American investors have anticipated retiring much earlier than white investors. In 2006, for example, 40% of black investors planned to retire before they turned 60, compared to only 22% of white investors. This year, only half as many African-American investors–21%–intend to retire before 60, compared to 14% of white investors.

However, it’s not all bad news. Despite being hurt by the recession, African-Americans are considerably more optimistic than white investors, with 75% describing themselves as hopeful about the current U.S. economy. In comparison, just 41% of white investors describe themselves as hopeful.


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