Minority Workers, Confront Your False Expectations About Retirement Saving

I am an African American financial advisor. However, African Americans and people of color have been a very small part of my wealth management business—so small, in fact, that the phenomenon spurred me to discover if what I have experienced holds true across the country. I have come into contact with very educated and successful African American businesspeople, but the one consistent factor is that many of them lag behind in their saving and investing experiences.

What is more disturbing is that African American and Hispanic workers are just as likely as American workers to feel confident about their retirement security, even though their savings and preparations lag behind, according to findings of the Minority Retirement Confidence Survey (MRCS). While some differences in retirement preparation can be attributed to differences in income distribution, other findings show that minorities are less prepared even when comparisons are made among workers with similar levels of household income.

A study conducted in 2007 by the nonprofit Employee Benefit Research Institute shared some educational information that cannot be overlooked. Here are some factors that have led to the lack of investing and saving among people of color.

·         Less than half of African American workers (48 percent, down from 62 percent in 2003) and Hispanic workers (41 percent, down from 60 percent in 2003) have saved money for retirement, making them less likely to have saved than workers overall (66 percent).

·         More than half of African Americans (54 percent) and Hispanics (55 percent) report having less than $10,000 in savings and investments, compared with approximately one-third of all workers (35 percent).

·         Roughly one-quarter of African Americans (27 percent, down from 46 percent in 1999 and 36 percent in 2003) and Hispanics (23 percent, down from 34 percent in 1999 and 31 percent in 2003) have tried to calculate how much they need to save for a comfortable retirement. In contrast, 43 percent of workers overall say they have tried to do a calculation.

·         Regardless of income, African Americans (39 percent) are more likely than workers overall (30 percent) and Hispanics (22 percent) to say a defined benefit pension plan will be a major source of funding for their retirement. Both African Americans (41 percent) and Hispanics (38 percent) are also more likely than workers in general (25 percent) to think Social Security will be a major source of income.

·         Many African Americans and Hispanics may be counting on money from a defined benefit pension plan that they may not receive. Up to 37 percent of African Americans and 36 percent of Hispanics appear to be expecting to receive this benefit from a future employer, compared with 21 percent of all workers.

·         More than half of African Americans (53 percent), compared with 4 in 10 of all workers (41 percent) expect to have access to retiree health insurance through an employer. A larger share of African Americans (34 percent) than workers overall (24 percent) and Hispanics (18 percent) also think they have private coverage for long-term care expenses.

·         Seven in 10 workers overall (70 percent), African Americans (72 percent), and Hispanics (69 percent) say they will have enough money to live comfortably throughout their retirement years. However, among those with household income of $25,000 or less, minority workers are considerably more likely than workers overall to feel confident.

·         Minority workers express higher levels of confidence about the future of Social Security and Medicare. Half of Hispanics are very or somewhat confident about Social Security (51 percent) and Medicare (52 percent), while 4 in 10 African Americans are confident about these programs (40 percent confident about Social Security, 43 percent confident about Medicare). In contrast, just 30 percent of workers overall report they are very or somewhat confident about Social Security and 37 percent are confident about Medicare.

My goal is to open the eyes of African Americans and other minorities and enabling them to start focusing on their retirements. These communities also need to become more educated about investing/saving and seeking financial advice. The financial markets are complex and can be intimidating if you are not familiar with their intricacies. Retirement saving can be a gradual climb if the proper steps are taken; if not, you will find yourself at the bottom of the mountain looking up. Don't simply retire from something; have something to retire to.

Louis Taylor is the president and senior financial advisor at Lake Oswego, Ore.-based TWM Wealth Management
Email: louis@twmwealthmanagement.com
Website: www.twmwealthmanagement.com