Ethnicity Affects Retirement Prospects

Although it’s been clear for some time that age and salary have clear roles in driving retirement savings, the meaningful roles race and ethnicity play have been obscured. While all Americans face the growing responsibility of planning and saving for retirement, there are distinct cultural differences that affect some groups more than others.

According to ING U.S.’s study “Retirement Revealed,” regardless of age and income, Hispanic workers are least likely to be prepared for retirement, with 54 percent indicating they feel “not very” or “not at all” prepared, and when they do contribute to their savings plans, they save at much lower rates than whites. This compares with 50 percent of African-Americans, 48 percent of white and 44 percent of Asian-American respondents indicating they don’t feel prepared.

The solution seems simple. Many employees, particularly multicultural employees, would like to get more help from their employers. ING’s study found face-to-face communication with a financial professional ranked highest in terms of value provided in getting information about retirement plans, yet only 28 percent of overall respondents are working with a financial professional. This compares to 19 percent of Hispanics, 20 percent of African-Americans and 22 percent of Asians.

When working with these individuals, Fabian Gonzalez, U.S. vice president of multicultural sales for ING, believes recognizing that different groups of employees are coming from difference reference points is important. A one-size-fits-all approach to retirement and investment education may not make sense.

“If employers have large groups of multicultural employees, they may want to look for local advisers from similar backgrounds to be available or offer on-site workshops,” he said. “This is particularly true if language is an issue.”

Gonzalez said a diversity executive should work with a benefits manager to evaluate participation in a retirement plan and see if there are obvious pockets of employees who are underrepresented.

“It is critical to make sure the education you, the employer, are providing is culturally relevant,” he said. “For all employees, people need to remember that they’re getting older. For multicultural individuals in particular, it is important to remind them that more and more children are mobile nowadays, and these children may not be living [with] them as they age — as their parents and grandparents experienced.”

Gonzalez said many first-generation Americans come to the U.S. to find better economic opportunities for their families but expect to return to their home countries. As the years progress, people’s feelings change, and many choose to make the U.S. their primary home. He urges diversity executives to vocalize that possibility to their employees and urge them to prepare for permanent residency as an option for the future.

The troubling racial and ethnic differences ING identified in savings behavior and retirement plans is a wakeup call that should prompt action to ensure all employees have both the knowledge and opportunity to secure a financially sound retirement for themselves.

“Financial planning workshops offered to employees at their work locations provide a convenient way to learn about retirement planning and the benefits of investing in a 401(k),” said Laurel Daring, assistant vice president of MetLife Diverse Markets, which provides financial services to multicultural communities in the U.S. “MetLife research shows that employees who participate in financial education programs in the workplace feel very confident about financial decision making. Employers should communicate the availability and benefits of these workshops in a way that will resonate with diverse members of their workforce. For example, employers should consider promoting the workshops to their employee affinity groups to ensure the message reaches employees that may need additional support getting started.”

MetLife’s “American Dream” study, published in October 2010, revealed a significant number of Americans are helping their family members financially, even though they may be struggling themselves. This is particularly true among African-Americans and Hispanics, with 59 percent and 52 percent, respectively, saying they have given money to family members in the past year so they can pay their bills. These numbers compare with 45 percent of Asian-Americans and 47 percent of Americans overall. Further, more than one-third, 35 percent, of Americans overall and 34 percent of Asian-Americans have had a family member give them money in the past year. This number jumps to 42 percent of African-Americans and 40 percent of Hispanics.

“While this data is important, one thing that’s key when it gets down to financial planning and an individual adviser working with a particular person or family is really getting to know what his or her story is, what the goals and concerns are,” Laurel said. “When diversity executives look at these sorts of studies and data, they have to look at it at an aggregate level. It illustrates a trend, but shouldn’t create preconceived notions when working with minorities.”

Ladan Nikravan is an associate editor of Diversity Executive magazine. She can be reached at lnikravan@diversity-executive.com.