Financial Literacy: Saving for Retirement More Challenging for Blacks

Financial Literacy: Saving for Retirement More Challenging for Blacks

Despite increased financial prowess among blacks in the last decade, prevailing racial disparities in investment strategies illuminate a need for more financial education.

Blacks tend to invest more conservatively than whites, relying more on employer pensions and real estate for retirement income than stock investments, according to the 2006 Ariel/Schwab Black Investor Survey. While the data shows increasing financial prowess among blacks in the last decade, prevailing racial disparities in investment strategies illuminate a need for more financial education.

Now in its ninth year, the annual Ariel/Schwab Black Investor Survey, conducted by telephone, evaluates the investment and savings practices of 500 white and 500 black homeowners who make $50,000 or more per year.

With traditional sources of retirement�life insurance, pensions, Social Security�in flux, blacks especially face new challenges. While most blacks and whites believe pension funds will not exist 10 years from now, 65 percent of blacks compared with 49 percent of whites work for employers who offer these traditional plans. But while whites' stated primary purpose for savings is to retire comfortably, many blacks have a different agenda.

"They want ownership, control and empowerment that stem from owning their own businesses," said Lisa Toppin, human-resources and diversity-programs director with Charles Schwab. "But they're considering this at a point of retirement. It takes money to fuel business; they have to use their savings, and many new businesses fail. If this happens, they may become dependent on their children, who then have little time to save themselves."

Fifteen percent of blacks, nearly four times the rate of whites, save in order to start a business post-retirement. But what if there is no return? While 90 percent of both groups consider themselves "very responsible" for retirement preparations, blacks are nearly twice as likely as whites to believe that "when corporate pensions go bankrupt, the government should be responsible for paying those people."

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