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Data & Research April 27, 2023
Black, Latino Workers Lag Behind in Retirement Saving
A Voya study finds added financial challenges reduce plan participation, savings rate and average balances for Black and Latino employees.
Reported by Natalie Lin
Black and Latino communities face greater barriers when saving than their white and Asian American counterparts, which can negatively impact retirement outcomes, according to a new diversity, equity and inclusion financial study by Voya Financial.
The study found that Black and Latino employees have lower levels of financial confidence: 59% of white and 56% of Asian American employees expressed financial confidence, compared to 43% of Latino and 37% of Black employees.
“Inclusion does not happen organically; organizations must be intentional at every level and apply a DEI lens to savings and benefits solutions to ensure all communities have the access, support and tools to clear the path to financial confidence and a more fulfilling life,” said Angela Harrell, chief diversity and corporate impact officer at Voya Financial, in a report summarizing the study.
On average, Black and Latino employees reported lower retirement plan participation, at a rate of 53% for Black and 45% for Latino employees. The participation rate was 66% for white employees, followed by 62% for Asian Americans.
The average balance also showed similar patterns, with white and Asian American individuals having higher balances than their Black and Latino counterparts: white $99K, Asian American $86K, Black $45K, Latino $43K.
Savings Falter
Conducted in June 2022, the Voya DEI analysis looked at the state of workplace retirement savings among underserved employee populations. The research examined retirement plan participant data from six plan sponsor clients in the U.S., including Voya, across various industries and representing more than 163,000 employees.
Asian American workers had the highest average savings rate at 9.5%, followed by white workers with 8.4%. Black employees reported a savings rate of 7.1%, 0.2 percentage points more than Latino employees.
Race also appeared to correlate with how employees manage their emergency savings: 40% of Asian American, 45% of white and 69% of Latino and 70% of Black employees said they were off-track on their emergency savings.
Employer Strategies
The paper shared proven employer strategies to help close the retirement savings gaps for Black and Latino communities, which includes ramping up financial wellness and education campaigns.
Employers should ensure that employees are fully aware of the benefits available to them. They can also offer personalized messaging most relevant to an individual. For example, language can be a significant barrier to education, so employers with a large Latino workforce can offer resources in Spanish for their employees.
FINRA, SFEPD Providing Tools, Education at HBCUs
In a separate announcement on Wednesday, the Financial Industry Regulatory Authority Investor Education Foundation announced that it is partnering with the Society for Financial Education and Professional Development to provide financial tools and education for students at Historically Black Colleges and Universities.
Students at two HBCUs, Florida Agricultural and Mechanical University and Alabama State University, will receive training to take FINRA’s Securities Industry Essentials Exam. Passing this exam can lead to competitive employment opportunities in securities industry professions. Individuals can work as a stockbroker, financial analyst, investment banker, asset management manager or in another occupation.
“Our partnership with the SFEPD will enhance financial knowledge and capability among the next generation of investors and heighten HBCU students’ awareness of FINRA,” said Gerri Walsh, president of the FINRA Investor Education Foundation, in a statement. “The program will also introduce participants to a range of professional opportunities in the securities industry and potentially expand the pipeline of college students of color considering the financial services industry as a career option.”
Voya found that employers who apply inclusion-focused best practices see positive results. Automated retirement plan features, in particular, make the most significant difference. Black and Latino employees with access to an auto-enrollment retirement plan have a participation rate two to three times higher than peers without auto-enrollment.
