Study: Retirement Plans of African-Americans and Hispanics Hit Hard During Tough Economy

The report notes that most workers who leave their employers with a loan outstanding—80% of African Americans, 76% of Hispanics, 71% of whites and 67% of Asians—subsequently default on them. Because loans account for an average of 205 of a worker’s balance, those who default suffer a significant financial setback.

Two-thirds (63%) of African-Americans and 57% of Hispanics who left their employer in 2010 cashed out their balances, the report says. In comparison, 39% of white employees, and just over a third (34%) of Asian workers did the same.

Ariel and Aon Hewitt found there is a racial gap in DC plan participation. Just two-thirds of Hispanics and 68% of African Americans contributed to a DC plan in 2010, while 79% of whites and 80% of Asian workers did so. Even when adjusting for factors such as age, salary and tenure, African-American and Hispanic employees were significantly less likely to have established a DC plan account, the report adds.

But the report notes that participation in DC plans “dramatically increases” among participants who are subject to automatic enrollment. When auto enrolled, 825 of African-American employees participated in a DC, compared to just 64% of those not subject to auto enrollment. Likewise, 83% of Hispanic workers participate in their employer’s DC plan when auto enrolled, compared to just 59% who were not automatically enrolled.