Blacks, Latinos, Asians lagging in pension, retirement savings
Paul Kleyman | 12/30/2013, 1:48 p.m.
“People of color face particularly severe challenges in preparing for retirement,” states a new report titled “Race and Retirement Insecurity in the United States” by the National Institute on Retirement Security (NIRS).
Although every demographic group faces significant risks, says the analysis, “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.”
In a live webinar last month, NIRS Research Manager Nari Rhee stated that unless the United States addresses the paucity of retirement resources, “I think we’re in real trouble.”
National Retirement Crisis
Underscoring the national retirement crisis ahead is the report’s finding that the typical U.S. household nearing retirement age has only an average of $12,000 set aside in retirement savings to supplement often modest Social Security checks.
Delving into federal data, Rhee examined racial disparities in retirement readiness among working households age 25-64. She found that three in four black households and four in five Latino households of working age have less than $10,000 in retirement savings, compared to half of white households.
In addition, says the report, about two-thirds (62 percent) of black and (69 percent) of Latino households of working age have not one dime in a retirement account, compared to a still-paltry 37 percent of white households.
According to the report, “Workers of color, in particular Latinos, are significantly less likely than white workers to be covered by an employer-sponsored retirement plan.” While 62 percent of whites had pensions, just over half (54 percent) of working age black and Asian workers and 38 percent of Latino employees work for an employer that sponsors a retirement plan.
The report stresses, “Some 92 percent of working households do not meet conservative retirement-savings targets for their age and income. Even when counting their entire net worth, 65 percent still fall short.”
Racial Disparities Between Public, Private Pensions
A major area of retirement security for non-white workers has been landing a government job, such as a postal carrier, teacher or transit worker. According to the NIRS report, 81 percent of all public employees report having an employer-sponsored retirement plan compared to only 52 percent of private employees.
In addition, most retirement benefits in public jobs are in more generous traditional pensions that provide retirees a defined amount every month with cost-of-living increases to keep ahead of inflation. In contrast, most private employers that do offer pensions set up 401(k) type plans to which they may contribute funds, but which leave investment decisions (such as funds to put the money in) up to individual workers.
The report emphasizes, “Interracial disparities are much greater in the private sector than in the public sector.”
Rhee said in an e-mail, however, that although public employment “has helped narrow racial and ethnic inequalities and strengthen the middle class,” that trend is changing. Polls show falling public support for public-service workers and their pensions, while pension coverage in the private sector is also declining.