Black workers are more vulnerable to the changes in the country's pension system than white workers and will be ill-prepared for their retirement as a result, according to executives for Ariel Capital and Charles Schwab.
"We are at an inflection point right now and we are witnessing a retirement crisis unfold in real-time, right in front of our eyes," said Mellody Hobson, president of Chicago-based Ariel Capital. "And African-Americans will be disproportionately hit by this crisis. Many have bought into the promise of a pension as a safety net — and that safety net now has holes."
According to the new "Black Investor Survey" from Ariel Capital Management LLC, Chicago, and Charles Schwab Corp., San Francisco, two-thirds of employed blacks participate in traditional defined benefit plans, compared with roughly half of the white workers surveyed. At the same time, the majority of all the respondents said they believe defined benefit plans will no longer exist in a decade.
"More African-Americans work for government entities that offer defined benefit pensions," said Lisa Toppin, director of diversity at Charles Schwab.
Ms. Hobson said blacks are currently "under invested" in their retirement. According to the survey, the median black worker has saved $59,000 for retirement, while the median white worker has saved $93,000. "There's a gaping hole between the two groups," said Ms. Hobson. "By saving less, and also by investing more conservatively, many African-Americans are missing out on years of compounding — some of the most powerful years of their lives."
The firms surveyed 1,000 adults — evenly split between blacks and whites — with a household income of at least $50,000 between April 26 and June 4.