Employers have begun to find troubling racial differences within their 401(k) plans, a gap they say could leave black workers far less financially prepared for retirement than whites.
Investor surveys and research by two large employers strongly suggest that blacks participate in retirement plans at far lower rates and are much less likely than whites to invest in the stock market. An industry wide study of 401(k) plan activity by race has never been conducted.
Exelon, the country's largest operator of nuclear power plants, found this year that about 15 out of every 100 black employees did not participate in its 401(k) plan, compared with about 10 of every 100 whites. It also found that one in three black employees contributed less than 5 percent of pay to the plan, compared with just 14 percent of whites.
Experts attribute lower investment rates to poor instruction on financial topics in public schools, and misconceptions about the risk of stocks within parts of the black community. Employers have also been urged to tailor their messages on retirement savings to account for what some black and Latino executives say are important cultural differences. And the federal government has been urged to strengthen its national strategy for financial literacy, which has been criticized as ineffective.
Historical factors may also play a role in blacks' preference of real estate over stocks. Racial discrimination by mortgage lenders may have heightened blacks' interest in owning a home. Blacks' lack of participation in retirement plans can put employers and the financial services industry on the defensive, said Lisa M. Toppin, Charles Schwab's vice president for employee development.
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