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Study Finds People of Color Are Less Prepared Financially for Retirement

While a majority think they have enough time to save, data show contrary trends

Couple looking reviewing 401k documents at home

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A majority of adults who identify as minorities — Asian Americans, Blacks, Latinos and Native Americans — think they have enough time to build a retirement nest egg, but many have made scant progress in setting the kinds of goals that would lead to long-term financial security, according to a new study.

For the “2020 Retirement Risk Readiness” study commissioned by the insurance company Allianz Life, 52 percent of those the survey called people of color (POC) said they “believe they have plenty of time to save for retirement."

But fewer than half (46 percent) said they have specific aims in mind. And other statistics bear out a lack of preparation.

Less use of retirement accounts

Fewer than half of the nonwhite respondents reported owning investments or accounts associated with retirement security. The rates for participation in employee-sponsored plans (48 percent) and IRAs (21 percent) are lower than the average for adults as a whole.

Cultural differences could explain some of the contrast, according to Cecilia Stanton Adams, chief diversity and inclusion officer at Allianz Life. The company sells annuities and life insurance that often are a part of retirement planning.


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"Oftentimes in communities of color, breadwinners are expected to balance support for multiple generations with their personal retirement goals,” she says. “This complexity, among others, could be responsible for the disconnect we see between perception and reality, putting POC at higher risk for retirement insecurity."

Allianz is not the first organization to identify a lack of retirement savings as a problem. The Employee Benefits Security Administration, part of the U.S. Department of Labor, studied the issue a decade ago, focusing on both minorities and women, and found that many minorities work at businesses that don't traditionally offer retirement plans. Individual retirement accounts and 401(k)s through employers often provide an easy way to save for retirement because money can be set aside automatically from paychecks and may qualify for deduction before federal income tax is calculated.

Historic racial disparities compound problem

Having less education than non-Hispanic whites also was more common among many minority groups, the 2010 federal study found. That generally results in working at lower-paying jobs, leaving less money for long-term personal savings — and less being paid into the federal government's Social Security program.

Magnifying the problem is family size, according to a 2019 Rand Corp. study. Non-Hispanic whites have the smallest families, Blacks and Asian Americans are in the middle, and Hispanics have significantly larger families, which also might affect breadwinners’ ability to save.

By ages 51 to 56, a Black worker has saved only 46 cents for retirement for every $1 a white worker has put away, according to a study from the Center for Retirement Research at Boston College released earlier this year. A Hispanic worker has saved 49 cents for every white worker's dollar.

"Minority households have tended to accumulate less wealth than whites in the past, even after controlling for age, income, education and marital status,” William G. Gale says in a blog item about his team's March 2019 Brookings Institution paper, "How Will Retirement Saving Change by 2050? Prospects for the Millennial Generation." “The difference appears to be growing over time for Black households relative to whites."

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