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Results from a recent survey found that there continues to be a gap in the retirement investment objectives and methods of high-income African Americans and whites. Looking at contributions to retirement accounts, the study found that the average monthly contribution invested into respective retirement accounts showed blacks set aside $210 per month while their white counterparts contributed $275 per month.
The 2005 Ariel Mutual Funds/Charles Schwab & Co. Inc. Black Investor Survey: Saving and Investing Among Higher Income African-American and White Americans, which polled blacks who own stocks or mutual funds and earn more than $50,000 annually, revealed that fewer blacks (45%) consider retirement their most important goal for saving, versus whites (60%). Sixteen percent of blacks surveyed said they were saving for a child’s education, compared with 10% of whites.
“Most people have never invested, so they have no idea how to choose or allocate the funds in their account,” says Ursula Strong, a Prudential Financial agent in Charlotte, North Carolina. “Most people are also not comfortable putting their money in an account that is not easily accessible, which is the case of 401(k)s.”
The study also revealed that 36% of blacks versus 24% of whites have taken money from their accounts prior to retirement age. After controlling for age, income, and other demographic variables the data reflects that blacks are 72% more likely to withdraw money early. Early withdrawal is subject to a 10% penalty assessed to anyone who withdraws from his or her 401(k) plan before age 591/2. Says Strong: “Anyone who does not contribute to their company 401(k), especially one that has employer matching, is missing out on a huge opportunity to have a nest egg at retirement.”