Money's article, "The Hidden Retirement Crisis," says that middle-class African Americans are more optimistic about the state of the U.S. economy and are more likely to be invested in the stock market than ever before. However, when it comes to investing for retirement, they still lag white Americans. According to a recent survey, 67% of African Americans are invested in stocks or mutual funds, compared with 86% of whites. Part of the reason for this is that African Americans have different attitudes and challenges around saving for retirement. Here are some of those financial hurdles and some advice on how to overcome them.
A persistent wealth gap. The most recent federal data shows that the difference in net worth between the typical black family and the typical white family at $131,000. Black neighborhoods weren't subject to federally backed mortgages until the late 1960s, so those property values were lower. The wage disparity is still present, with black men making 75 cents on the dollar. To close this wealth gap, the knowledge gap must be closed by discussing investing in the stock market, buying appreciating assets, using homeownership as a wealth creator, and starting businesses that create a legacy for families.
401(k)s. While African Americans have as much access to qualified employer-sponsored plans as whites, not everyone of either race does themselves the favor of taking advantage of the benefit: 74% of blacks currently contribute vs. 85% of whites. Many of those who do contribute do so below the employer match. They claim that their income isn't high enough. However, not getting the employer match is like leaving free money on the table. If your company offers a 401(k) plan, contribute at least up to the matching company funds.
Overspending. All of us need to try to get a good handle on our debt, live well within our means, and make sacrifices. Spend less and save more!
The first step to a secure retirement is to set a savings goal. People who commit to a financial plan save more than twice as much as those without one. Saving for retirement means putting the proper tools to work as soon as you can.
Reference: Money (March 16, 2016) "The Hidden Retirement Crisis"