Can You Afford to Retire?

Are you saving enough for retirement?

Apparently not, according to a new study by Ariel Mutual Funds and Charles Schwab Corp. The two investment companies say African-Americans save far less money in their 401K plans than Whites. And they are saving no more than they did 10 years ago. In fact, despite the stock market boom of the last several years, blacks are no more likely to be investors, preferring more cautious plans that offer less risk and much less reward. And even when offered company-matched 401K plans, African-Americans invest in them at a much lower rate.

Truth is most Americans are not saving enough for retirement, but for African-Americans who often have fewer family resources and who are often responsible for supporting an extended family, the consequences can be dire. In addition, Ariel Mutual Funds President Mellody Hobson says blacks tend to invest more in less liquid real estate, so this foreclosure mess may have even graver consequences.

Hobson says we should follow the flight attendant's rules: Put the oxygen mask on your face first before helping others.

Here are some of the highlights from Ariel-Schwab Black Investor Survey:

Of the 500 Blacks and 500 Whites earning more than $50,000 annually, the median amount of money saved by Blacks surveyed is less than half of their White counterparts ($48,000 versus $100,000). On a monthly basis, median savings is $182 for Blacks versus $261 for Whites.
In 1998, when 57% of Blacks and 81% of Whites said they owned individual stocks or stock mutual funds. A decade later, still just 57% of Blacks are stock investors, compared to 76% of Whites. During the past ten years, the number of Blacks who own stocks or mutual funds rose as high as 74% (in 2002) only to fall again, while White participation has consistently hovered within a few percentage points of 80%.
Retired Blacks have median savings of just $73,000 compared to $210,000 for Whites. Blacks, on average, also retired earlier than Whites (59 vs. 61) and are more likely to rely on a pension or Social Security rather than a defined contribution plan, such as a 401(k) plan.
Fewer Blacks than Whites have gone through some of the basic steps of retirement planning, such as calculating the amount of money they need to live comfortably in retirement. However, those who consulted with financial professionals were much more likely to have saved more than $100,000 by the time they retired, and were much less likely to have retired early.

For more information, visit www.arielmutualfunds.com or www.aboutschwab.com to read the entire report.

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