Obstacles to Saving for Retirement
Presentation by
Wilhelmina A. Leigh
Joint Center for Political and Economic Studies
“Retirement Issues in the 21st Century”
National Press Foundation
Washington, DC
21 June 2010
Organization Of Presentation
Why Does Saving for Retirement Matter?
 Macro Obstacles
 Micro Obstacles
 How to Address Obstacles

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Joint Center for Political and Economic Studies
Why Does Saving for Retirement
Matter?

All three legs of the metaphorical retirement
income stool are a bit unstable. The legs are:
 Social Security
 Employer-sponsored pensions
 Private savings and investment

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Most workers today and in the future will
need to rely on private savings and
investment more than on the other two legs
of the stool during retirement.
Joint Center for Political and Economic Studies
Social Security Leg of Retirement
Income Stool

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Its “pay-as-you-go” financing system will
be challenged in the future by:
◦ Baby Boom retirements
◦ Increased life expectancy
◦ Decreasing birth rates
Joint Center for Political and Economic Studies
Social Security Leg of Retirement
Income Stool (cont’d)

Social Security benefits constitute a floor
for financial needs during retirement.
Beneficiary Group
African American Males
African American Females
$1,109.30
945.50
White Males
1,333.80
White Females
1,014.50
Other* Males
1,004.90
Other* Females
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Average Monthly Benefit
(12/08)
869.10
* Includes Asians and Pacific Islanders, American Indians and Alaska Natives,
and a subset of the total number of beneficiaries of Hispanic origin.
Joint Center for Political and Economic Studies
Availability of and Participation in Employer-Sponsored
Retirement Plans, by Race/Ethnicity, 2007 (Percent)
60
All
52
50
African Americans
48
Hispanics
42
39
40
35
30
26
20
10
0
Employer offers such a plan
Employees who participate
2007 EBRI Minority Retirement Confidence Survey
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Joint Center for Political and Economic Studies
Amount Saved for Retirement by Race/Ethnicity, 2007
100
90
80
48%
70
$250,000 or more
70%
72%
60
$100,000 - $249,999
$50,000 - $99,999
$25,000 - $49,999
50
Less than $25,000
10%
40
13%
30
13%
11%
15%
20
7%
7%
7%
6%
4%
4%
African American workers*
Hispanic workers
10
14%
0
All workers
* Percents do not sum to 100 due to rounding.
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2007 EBRI Minority Retirement Confidence Survey
Joint Center for Political and Economic Studies
Macro Obstacle: Access to
Retirement Saving Vehicles
 The
most readily accessible vehicles for
retirement saving are provided through
employers (e.g., 401(k), 403(b) plans).
◦ Not available if unemployed
◦ Not universally available, even among
employed persons
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Joint Center for Political and Economic Studies
Macro Obstacle: Labor Market
Segmentation
Low-income labor force is disproportionately
African American (21.4%) and Latino (28.4%).
 Workers in the lowest earnings quartile are less
likely to work for employers who offer
retirement plans (38%) than are workers in the
highest earnings quartile (73%).
 Thus, African American and Hispanic workers
are less likely than white workers to have access
to retirement plans through their employers.

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Joint Center for Political and Economic Studies
Macro Obstacle: Legacy of
“Separate but Equal”

The racially segregated communities in
which African Americans and Hispanics
often live frequently have inferior
education systems and also may not have
financial institutions.
◦ Inferior education systems are less likely to
offer financial education.
◦ Absence of financial institutions is likely to
limit familiarity and comfort with mainstream
financial products and services .
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Joint Center for Political and Economic Studies
Micro Obstacles to Saving for
Retirement
Intentions
 Expectations
 Behaviors

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Joint Center for Political and Economic Studies
Micro Obstacles: Intentions

Many say they want to save every month
but don’t have enough money to do so:
Percent Of Each
Group by Income
All Income Groups Persons with
Income ≤ $35,000
African Americans
53
65
Whites
35
50
All Races
37
52
2009 JC Poll
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Joint Center for Political and Economic Studies
Micro Obstacles: Expectations

African Americans and Hispanics differ
from workers of All Races in their
expectations about major sources of
retirement income:
◦ … more likely to expect Social Security or an
employer-sponsored pension to be a major
source
◦ … less likely to expect personal savings and
investment to be a major source
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Joint Center for Political and Economic Studies
Social Security as an Expected Major Source of Retirement
Income, by Race/Ethnicity, 1998, 2005, 2007, and 2009
(Percent)
45
1998
41
40
37
2005
2007
2009
38
35
35
30
29
27
25
25
20
21
20
15
10
5
0
African Americans
Hispanics
All Races/Ethnicities
Leigh and Huff. 2007 (1998 and 2005 data)
Helman, VanDerhei, and Copeland. 2007 (2007 data)
2009 Joint Center Poll
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Joint Center for Political and Economic Studies
Employer-Sponsored Pension as an Expected Major Source of
Retirement Income, by Race/Ethnicity, 1998, 2005, 2007, and
2009 (Percent)
45
1998
39
40
2005
2007
2009
35
30
29
26
25
23
22
20
20
19
14
15
13
10
5
0
African Americans
Hispanics
All Races/Ethnicities
Leigh and Huff. 2007 (1998 and 2005 data)
Helman, VanDerhei, and Copeland. 2007 (2007 data)
2009 Joint Center Poll
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Joint Center for Political and Economic Studies
Personal Savings and Investment as an Expected Major Source
of Retirement Income, by Race/Ethnicity, 1998, 2005, 2007,
and 2009 (Percent)
70
63
60
1998
2005
2007
2009
49
50
50
43
42
39
40
30
29
27
21
20
10
0
African Americans
Hispanics
All Races/Ethnicities
Leigh and Huff. 2007 (1998 and 2005 data)
Helman, VanDerhei, and Copeland. 2007 (2007 data)
2009 Joint Center Poll
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Joint Center for Political and Economic Studies
Micro Obstacles: Behavior
All workers (60%) are more likely than either
African American workers (45%) or Hispanic
workers (34%) to “currently save for
retirement.”
 Among employees in 57 of the Fortune 500
companies, African Americans (66%) and
Hispanics (65%) were less likely than Asians
(76%) and whites (77%) to participate in the
401(k) plans available to them.

2007 EBRI Minority Retirement Confidence Survey
2009 Ariel/Hewitt Study
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Joint Center for Political and Economic Studies
Micro Obstacles: Behavior
Share of Each Group
with Given Asset
(Percent)
Savings*
Bonds
Stocks/
Mutual
Funds
IRAs or
Keogh
Plans
ALL INCOME GPS
African Americans
51
17
27
28
Whites
72
27
49
47
All Races
70
26
47
45
African Americans
30
8
12
15
Whites
59
22
27
26
All Races
52
20
25
24
INCOME ≤ $35,000
2009 JC Poll
* Includes savings accounts, CDs, and Money
Market Accounts.
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Joint Center for Political and Economic Studies
How to Address Obstacles

Amend policies governing employersponsored retirement plans

Enact policies to expand use of retirement
saving vehicles not sponsored by employers

Enhance knowledge about ways to save in
general and to save for retirement, in
particular
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Contact Information
Wilhelmina A. Leigh
Senior Research Associate
Joint Center for Political and Economic
Studies
202-789-3529 (phone)
202-789-6369 (FAX)
[email protected]
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Joint Center for Political and Economic Studies