$6.8 Trillion! That’s How Much Americans Are Short On Retirement Savings

January 2, 2014  |  

Americans are spending more than they are savings and their retirement planning is suffering. Add to this the recession, the loss of jobs and stagnant wages, many just don’t have enough left over to save.

“The result is that Americans are at least $6.8 trillion short of what they need to have saved for a comfortable retirement, according to the National Institute on Retirement Security. For those on the eve of retirement — ages 55 to 64 — the shortfall comes to $113,000 per household,” reports the Huffington Post.

Because of this crisis, many predict many will require extra government help in old age.

But the crisis seems to run along racial lines, according to a new study, Race and Retirement Insecurity in the U.S. The future is bleakest for blacks and Latinos.

“If nothing changes, the future for people of color is frightening,” author Nari Rhee, research manager for the nonprofit National Institute on Retirement Security , told MarketWatch.

According to the report:

  • Workers of color (Latinos especially) are less likely than whites to have employer-sponsored retirement plans. Only 38 percent of Latino employees (age 25 to 64) and 54 percent of blacks work for firms with such plans while 62 percent of white workers do.
  • Blacks and Latinos are less likely to have a separate retirement savings than white households of the same age. About two-thirds of black working-age households (62 percent) and Latinos (69 percent) do not have retirement accounts. Only 37 percent of white households don’t.
  • Three out of four black households age 25 to 64 and four in five Latino households have retirement savings worth less than $10,000.
  • The average retirement savings among near-retirees in households of color is $30,000; for white households  is $120,000.

There are complicated reasons for the disparities. “Minorities disproportionately work for employers that don’t offer retirement plans. According to NIRS, blacks and Latinos are less likely than whites to be employed in industries and occupations that provide high wages and workplace benefits, including retirement plans,” reports MarketWatch.

And on a whole, blacks and Latinos earn less than whites, which equals less money to put into retirement accounts.  Additionally, people of color are not as likely as whites to contribute to available 401(k) plans.  According to an Aon Hewitt study, only 68 percent of African-Americans and 66 percent of Hispanics participated in their employers’ retirement plans in 2010, compared with 79 percent of whites.

Those minorities who do contribute to employer-sponsored retirement plans are more likely than whites to dip into them before retirement. About 36 percent of black participants in 401(k) plans and 31 percent of Hispanics have made withdrawals from them, cashed out their balances when they leave their place of employment or taken out 401(k) loans, according to financial services consultant HelloWallet.  But only 25 percent of white workers have done the same.

Lastly, blacks and Hispanics are more often conservative investors than whites, which can inhibit their returns, according to Prudential and ING. Prudential’s 2013 report, The African American Financial Experience, shows that 10 percent of African Americans own mutual funds and 13 percent own individual stocks.

Are you on top of your retirement planning efforts?

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