For the past 11 years, Ariel Investments, LLC, and Charles Schwab have teamed up to conduct the annual Black Investor Survey. The goal of this survey is twofold: To show the differences in how black and white Americans approach investing, and to raise awareness in the African-American community regarding the importance of investing.
While this year's study revealed some interesting differences, what I noticed most was a glaring similarity: No one is saving enough for retirement. But the survey also hinted at a few ways to improve the situation. First, people who plan early are the ones who get ahead. And employers have a real opportunity to encourage their workers -- all their workers -- by providing the tools and resources that will help them make informed decisions about retirement planning.
PARTICIPATION IS HIGH ... BUT SAVINGS ARE LOW
Participation rates in employer-sponsored, defined-contribution plans (401(k) and 403(b) plans) are actually quite high. The survey found that about 90 percent of those who have access to a defined-contribution plan defer part of their pay into it each month; that figure holds true for both groups. However, African-Americans contribute considerably less: An average of $169 per month versus $249 per month for white workers. That's a difference of nearly 50 percent, which adds up. The median total household savings for African-American 401(k) investors is $53,000. For white investors, the median total household savings is $114,000. All those surveyed had household incomes of at least $50,000.
Clearly, this gap is a problem, and I'll talk about some of the ways to close it. But first I want to highlight the larger issue with these statistics: No one is building the kind of wealth they need for a comfortable retirement.
RETIREMENT IS THE PRIORITY
While it's obviously beneficial that the majority of workers are contributing to their 401(k) accounts, it should be equally obvious that $53,000 (or $114,000, for that matter) is nowhere near enough for retirement, assuming that is the respondent's primary financial asset. The median age for African-American respondents was 47 years old, while it was 51 years old for white surveyors.
For some perspective: According to financial experts, if you want to draw $50,000 a year for 30 years from your retirement account, you will need to amass approximately $1.25 million by the time you retire.
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