With Fewer Investable Assets, Minorities Fall Behind in Retirement Savings

While the majority of Americans in a new survey from the TIAA Institute reported having some retirement savings, retirement preparedness for Black Americans, Native Americans and Hispanic Americans remains spotty: Many do not feel confident in their ability to retire or are unsure of how much they have saved.

TIAA’s report, “State of Financial Preparedness in a Diverse America,” revealed that 76% of white households surveyed have at least some retirement funds in a 401(k), individual retirement account, Roth IRA or pension fund, whereas only 52% of Hispanic households, 49% of Black households and 43% of Native American households have money in those sorts of accounts.

From May to June 2023, TIAA partnered with market research company Ipsos to survey 1,684 U.S. adults, aged 22 to 75, representing a mix of life stages with respect to retirement planning, and conduct hundreds of interviews within several racial and ethnic groups, including: Black, Hispanic, Asian American or Pacific Islander and Native American.

Almost one-quarter of retirees and those planning to retiree (22%) are also unsure how much they have saved for retirement via tax-advantaged accounts. This uncertainty climbs to nearly 30% for Black Americans and almost 40% for Hispanic Americans who have not yet retired but plan to do so.

According to TIAA, even among those able to estimate their savings, account balances among those planning to retire skewed low—nearly half of respondents reported less than $250,000 saved.

Surya Kolluri, head of the TIAA Institute, says part of the reason why some workers may lack awareness about how much they have saved for retirement may be because they do not know how to access this information.

“If I’m a busy technician out on the road doing my technical repairs, for example, I am busy doing that job and [am] less worrying about, ‘Where do I find my 401(k) balance?’” Kolluri says. “Even if I had 15 minutes to go find it, where can I go find it? Even if I did find it, do I know what to make of it? Do I know what the balance is today, compared to three months ago [and] compared to what the markets are doing?”

Kolluri says if employers can make accessing account balances a simple process, it “can go a long way.” He also says some employees may not want to check their balances if they suspect it will be bad news. Many participants may also have old 401(k) balances from previous jobs, and Kolluri says people often forget about these previous accounts that then become “stranded assets.” He recommends that participants work with a financial adviser who can help them understand how to access these various accounts, as well as create a financial plan.

The survey also found that about 25% of Black Americans, Native Americans and Hispanic Americans have no liquid investable assets at all. More specifically, 26% of Black Americans have no liquid investable assets, as well as 26% of Native Americans and 25% of Hispanic Americans, compared with only 12% of AAPI and white Americans, TIAA found.

As a whole, TIAA found that Americans are twice as likely to have less than $50,000 in investable assets than they are to have at least $500,000.

Kolluri argues that employers have an opportunity to address the issue by improving financial literacy, such as providing practical tips on how to maximize retirement contributions, as well as longevity literacy—helping people understand that they will likely have to fund a longer retirement, as people are living longer—and health literacy.

“The Medicare statistic [in the report] is pretty interesting, where [more than] 40% of people who have not yet retired did not know how much out-of-pocket costs they would have to come up with even if they were on Medicare,” Kolluri says.

Additionally, an obstacle that often prevents Americans from saving for the long term is debt—whether from a mortgage, student loan or credit card. Black Americans stood out for having student loans, credit card balances not paid in full each month and a more loans than other racial and ethnic groups, according to TIAA.

However, according to new Fidelity research on the financial health and outlook of Black Americans, it was found that 76% of Black Americans believe they will be in a better place financially in 2024 than they were in 2023. In fact, 2023 was already an improvement from 2022, with 41% of Black Americans saying they were in a better financial situation last year, as opposed to 31% of all Americans.

Fidelity also found that for many Black Americans, the future seems far off, as the population expressed feeling less worried about a comfortable retirement, suggesting many feel disconnected with the reality of their preparedness for retirement. Even so, Black Americans were more likely to say that they plan to increase annual retirement savings this year and were more apt create a financial plan in 2024 than in previous years.

Kolluri emphasized that plan sponsors should implement automatic enrollment and automatic escalation into their plans, if they have not already, in order to encourage savings, as well as explore providing some sort of guaranteed lifetime income within the defined contribution plan to help people feel more secure about their long-term savings.