Workplace Retirement Plans Could be Big Boon to African Americans

July 19, 2005 ( - Employer-sponsored retirement plans could prove unusually effective in getting more African Americans into the world of investing, a new survey found.

A news release said that according to the 8th Annual Ariel-Schwab Black Investor Survey, African Americans may do unusually well in a workplace retirement program setting.

The survey found that all else being equal, black participants who have help from a financial advisor contribute more money on a monthly basis to their retirement plans than do those who go it alone. Also, black employees showed a stronger preference for receiving information on their retirement plans through one-on-one meetings with benefits advisors (49% for black employees versus 42% for white employees) or in seminars (27% versus 16%). Fewer black employees than white employees want information through e-mail (black employees 28% vs. white employees 37%) or the Web (black employees 28% vs. white employees 34%).

“If we can raise the comfort level through more personalized service and stronger communications, we will see a leveling of the playing field.” Ariel Capital Management President Mellody Hobson said in the news release.

Furthermore, the survey shows that black workers are particularly receptive to information about and help with retirement investing provided by their employers. Among both black and white workers with employer-sponsored retirement plans, three out of four consider automatic payroll deductions to be “very valuable” features of their plans. But significantly more black employees than white employees view “communications and tools provided by your employer” (63% vs. 53%) and “the ability to invest in company stock” (53% vs. 40%) to be “very valuable.”

The Challenges

But an African American audience presents employers with its own set of challenges when it comes to retirement plan participation, according to the news release. Fewer black workers than white workers overall (45% vs. 60%) consider retirement their most important goal for saving. African Americans who are investing regularly in retirement accounts contribute an average of $65 per month less than white employees ($210 vs. $275). Additionally, significantly more black plan participants than white participants have taken out funds from their accounts prior to retirement (36% vs. 24%).

T he survey finds that African Americans who are saving primarily for retirement are almost twice as likely to be stock investors as those who are saving for other reasons, such as to pay for education. White investors however, are equally likely to be stock investors regardless of their saving and investment goals.

The percentage of higher income African Americans (households earning over $50,000 annually) who own stocks or mutual funds continues to lag behind higher income white Americans, with 65% of African Americans vs. 80% of white Americans invested in the market. African American investing has fluctuated over the years from a low of 57% in 1998 to a high of 74% in 2002; the corresponding figures for white persons have remained statistically flat, hovering around 80%.

The random sample survey of 500 black and 500 white households earning over $50,000 annually was conducted by telephone between March 18 and April 8, 2005 by Argosy Research.

More about the survey is here .