Business
African American and Latino households hardest hit by decline in retirement savings
(Business Wire) – A new report calculates the severity of the U.S. retirement security racial divide. The analysis finds that every racial group faces significant risks, but people of color face particularly severe challenges in preparing for retirement. Americans of color are significantly less likely than whites to have an employer-sponsored retirement plan or an individual retirement account (IRA), which substantially drives down the level of retirement savings.
Race and Retirement Insecurity in the United States examines racial disparities in retirement readiness among workers and households age 25-64. It analyzes workplace retirement access, retirement account ownership, and retirement account balances.
“I am alarmed by the severity of the retirement racial divide,” said Nari Rhee, PhD, report author and the National Institute on Retirement Security manager of research. “It’s well documented that regardless of race, the typical working-age American household is far off-track toward accumulating sufficient savings to meet their basic needs in retirement. As we dig deeper into the data, we find an even worse situation for African Americans, Latinos and Asians. For example, only 4 out of 10 Latinos and about 5 out of 10 Asians and African Americans work for employers that sponsor retirement plans, compared to 6 out of 10 white employees. With low access to retirement plans and low wages, what we are ultimately seeing is little if any retirement savings among people of color.”
“To further illustrate the extent of the racial divide, a typical white household near retirement has nearly US$30,000 saved in retirement accounts, clearly an insufficient amount. A typical African American or Latino household near retirement fares even worse, with zero dedicated retirement savings in a 401(k) or IRA.
For working-age households, the average retirement savings is only about US$20,000 among African Americans and US$18,000 for Latinos – a small fraction of the US$112,000 average among white households,” Rhee said.
She added, “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. 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.”
The key findings are as follows:
– 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 pension.
