U.S. Faces Severe Racial Divide in Retirement Planning

The other most significant finding of the study is that the retirement race gap is greatest as you go up the age ladder. So workers nearing retirement see the greatest gap. This is especially troubling, Rhee said, since the Baby Boomers have little time left before retirement to make up for their lack of retirement savings.

To illustrate the extent of the problem, Rhee says a typical white household has approximately $30,000 in retirement accounts as workers reach retirement age, and another $112,000 in retirement savings. That is obviously not enough to provide for a comfortable retirement for one individual, let alone a couple. But consider the plight of the typical black or Latino household, which as they reach retirement age has $20,000 or $18,000 respectively in savings, and nothing set aside in a 401(k) or IRA.

What the study found

Rhee said the race and retirement study revealed several key trends, none of which were encouraging. They are:

Workers of color, in particular Latinos, are significantly less likely than white workers to be covered by an employer-sponsored retirement plan – whether a 401(k) or defined benefit (BD) pension.

• 62 percent of white employees work for an employer that offers a retirement plan, compared to 54 percent of blacks or Asians, and 38 percent of Latinos

• 42 percent of Latinos, 15 percent of blacks and 13 percent of Asians in the private sector are less likely than whites to have access to a job-based retirement plan; compared to 12 percent, 10 percent, and 9 percent respectively in the public sector.

• 24 percent of white households have access to a DB pension, compared to 16 percent of black households.

Households of color are far less likely to have dedicated retirement savings than white households of the same age. At the same time, retirement coverage appears to be positively associated with the existence of dedicated household retirement savings in both groups.

• 69 percent of Latino and 62 percent of black households respectively do not own assets in a retirement account, compared to 37 percent of white households

Households of color have substantially lower retirement savings than white households, even after controlling for age and income.

• Approximately 80 percent of Latino and 75 percent of black households age 25-64 have less than $10,000 in retirement savings, compared to approximately 50 percent of white households.

• Only 19 percent of households of color near retirement have retirement savings equal to or greater than their annual income, compared to 41 percent of white households.

“American workers and families face a retirement crisis in which a majority of households are at risk for downward mobility in retirement, and a significant share face not being able to meet basic expenses in old age,” Rhee said.

Indeed, Rhee said the “Race and Retirement Insecurity” report serves as a companion to the NCIS July 2013 report, “The Retirement Savings Crisis: Is It Worse than We Think?” That study found that American workers today are less prepared for retirement than any point since 1979.

But the retirement crisis “is particularly dire for blacks,” Rhee says.

“With little else to depend on besides Social Security when they retire, people of color are especially vulnerable to reliance on public assistance and economic hardship in old age,” Rhee said. “Our research makes it clear that placing a special focus on improving the retirement readiness for Americans of color is absolutely essential to solve the national retirement crisis.”