As the baby boomer generation nears retirement, many Black employees may be forced to continue working until the day they die. “That’s because Blacks are not big on personal finance such as retirement plans and investing in the stock market,&r
As the baby boomer generation nears retirement, many Black employees may be forced to continue working until the day they die.
“That’s because Blacks are not big on personal finance, such as retirement plans and investing in the stock market,” said Erika Campbell, a financial planner for Northern Trust Bank. “But it’s not done on purpose. We don’t plan on failing, we just fail to plan.”
The average Black male has $35,454 less saved in a retirement fund than his white counterpart, according to the 10th Annual Ariel-Schwab Black Investor Survey conducted by Ariel Investments LLC and Charles Schwab & Co. investment firms.
The survey looked at 1,008 employees and 604 retirees, and concluded that Blacks continued to save far less money than whites.
Black employees cite income disparities as one reason for not investing.
“How can you invest if you are living check to check because you do not make enough to save or invest?” 55-year-old Albert Tucker questioned. He has worked for 20 years as a produce manager at Jewel food store.
“After Uncle Sam takes his cut and you pay for groceries, health insurance and housing, there’s not much left to invest.”
The 2007 survey of Blacks and whites earning at least $50,000 a year also showed that the median amount of money saved by Blacks is $48,000 compared with $100,000 for whites. And on a monthly basis, median savings is $182 for Blacks versus $261 for whites.
Anita Watkins, 48, has worked 17 years as a secretary at St. Xavier University on the Southwest Side, and still struggles to save for retirement. “I am a single parent with three teenage kids so saving up a nest egg is not easy for me,” Watkins said. “If I made more money, I would be able to invest in the stock market even if I don’t understand it.”
Aside from having limited income, a lack of knowledge about personal finance options is another reason some Black employees give for not investing.
“What the hell do I know about the stock market? Why would I invest in something I don’t understand?” Scott Ford, 39, questioned. “Nowadays it’s not safe to invest in the market anyway because you could lose all your money,” Scott, a dispatcher for the Maywood police department, said.
That could be why Black participation in the stock market dropped from 64 percent in 2006 to 57 percent in 2007, according to the survey.
According to Campbell, the stock market is the starting point for any smart investor, and Blacks are at a disadvantage because they did not grow up talking about investments at the dinner table.
“Investing in the market is a lot safer than people think. Actually, it’s safer than putting money in the bank because a bank can get robbed,” Campbell said. “Most Blacks did not grow up with parents who educated them about personal finance or credit like most whites. We (Blacks) talked about school, church and work at the dinner table.”
While investing in college is important, especially with the rising cost of tuition, Ariel Investments’ Mellody Hobson said parents should invest in a retirement plan first.
“Too many parents, Black parents in particular, will save money for their kids’ college tuition before they save for their own retirement, and that’s not good,” said Hobson, 39, president of the Black-owned, Chicago-based firm. “As a parent, you should save for your retirement first and college second.”
She added that a retirement plan could also be used to help finance college expenses.
Only about 10 percent of Blacks are investing more than $500 a month into a retirement account, as opposed to 22 percent by whites, said Carl Dorsey, a managing director for Hughes Capital Management, a Black-owned investment firm in Alexandria, Va.
“Whites are three times more likely to roll over their retirement plan to an Individual Retirement Account or another qualified retirement plan after being fired or laid off from a job than Blacks,” Dorsey said. “When we leave a job, we withdraw our retirement funds and live off it until we find another job, which normally comes after we spent everything.”
He added that many first-time Black investors do not know what it means when someone says a company’s 52-week high is $45 and low was $21.75. Nor will they know what market capitalization means when referring to a publicly traded company.
“Lord forbid if you ask the average Black employee with a retirement plan such as a 401(k) plan or a 403(b) plan what is a mutual fund or what is the Securities and Exchange Commission?” Dorsey added.
Wendell Hutson can be reached via e-mail at email@example.com
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