Saving For Retirement As a Minority

One area that has recently been under study is the reason minorities aren’t investing as much as they could. While there is an overall need to start planning for the future, particularly retirement, African Americans and Hispanics are among the groups that invest the least. Only 66 percent of African Americans and 65 percent of Hispanics working in companies that have retirement plans invest in the 401(k) options that are offered. This is compared to 77 percent of their White coworkers and 75 percent of Asian employees. According to research done by Hewitt Associates, there are quite a few cultural reasons as to why minorities don’t save money. One of the reasons given for African Americans is trust issues with financial institutions like banks, as well as with those professionals responsible for overseeing their retirement plans. These issues are well-founded; the banking world has long been a “good old boys’ club,” run and organized by well-to-do white males. Few steps have been made to make investing welcoming for both women and minorities, and it can be difficult to get past the psychological barriers of being told what to do by a group of investment professionals who typically operate by offering rules and regulations rather than by offering explanations and advice.

For both Hispanics and African Americans, the issue of large extended families also comes into play. In both cultures, it is much more common for grown children to care for parents or even aunts and uncles as they get older. It is quite possible to have up to 10 or more people living on just one or two incomes, therefore making it difficult to save up or invest for the future. This also means that more minorities withdraw from their 401(k) plans, especially when illness or financial hardship falls on a loved one.

Does this mean that minorities shouldn’t look at investment as a viable option? Not at all. It does, however, mean that African Americans, Hispanics, and other minorities may need to take a different approach when planning for savings and retirement. Some techniques that are working well include the following:

– Work for a company that has adjusted its 401(k) to make enrollment compulsory or even more beneficial. Companies that add incentives for investing tend to have a higher rate of participation from minorities.

– Take full advantage of any incentives to invest that your employer is offering. If they are matching your investment, make sure you put in as much as you can afford each month and maximize your investment. – Pay yourself first. By setting up automatic payments to a separate savings account each month when your check comes in, you won’t be tempted to spend it on something else. This is a great way to steadily save up cash, then invest it in one lump sum to essentially multiply what you have saved.

– Find a financial advisor you trust. Your financial advisor is your partner in savings and investment plans. When you find someone you can have open and honest dialogues with, you will be more likely to feel comfortable with the decisions you make as a team.

Because the barriers to financial freedom are cultural, social, and financial, it can be difficult for minorities to save and invest. However, everyone deserves a chance at having a solid investment portfolio, savings account, and retirement plan – regardless of your race, gender, economic background, or lifestyle.

Questions? Email me at to learn more about retirement, personal finance, and estate planning.


Your email address will not be published. Required fields are marked *