Data & Research June 7, 2009

D.C.-Based African Americans Optimistic, but Need Financial Guidance

African Americans in Washington, DC, are twice as optimistic as the general U.S. population that their financial situation will improve over the next year, but most say they don’t have a financial game plan and many don’t know where to start, according to a new survey.
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The survey, commissioned by The Smiley Group and Nationwide Insurance, found that 59% of African Americans in Washington, D.C., expect their household situation to be better a year from now, compared to only 30% of the general U.S. population sharing similar optimism. However, nearly half of African Americans in D.C. say they are not proactive about their financial future, according to a release of the survey results.

Four in five African Americans in D.C. do not have a professional financial adviser, because they don’t think they need one or think they can’t afford one. Further, two in three do not have a written financial plan, and one in five say they don’t know where to start when it comes to personal financial planning.

Despite that, the survey found they are more likely than African Americans nationwide to have a written financial plan and shop around for financial products and services. D.C.-based African Americans also show a greater interest than the general U.S. population in obtaining financial and retirement planning information from seminars, a financial adviser, an insurance agent, family and friends, or television.

More than half of African Americans in D,C, say they are confident in their ability to make savings and investment decisions, but nearly 2 out of 5 also indicate they are struggling with credit card debt, according to the release.

Only 12% of DC-based African Americans said that saving for education is their most important financial goal, but nearly one in three African Americans in DC with children under 21 said they are extremely worried about being able to afford a college education for their children and only about one in 20 have a college savings plan.

The online survey was conducted in January by the Blackstone Group. The 1,600 respondents age 18 and older were split into four sample groups: 600 general population, 600 African American, 200 general population in Washington, DC, and 200 African American in Washington, DC.

Data & Research June 7, 2009

Participants May Be Overconfident About Their Investments

Most participants are pretty confident about their investment diversification—but a new survey suggests that confidence may be misplaced.
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A national survey by Wells Fargo & Company’s employee benefits consulting group, Bryan, Pendleton, Swats & McAllister, LLC (BPS&M) indicates that four out of five participants (80%) believe their investments are well-diversified, but Wells Fargo’s analysis of the actual investments of 401(k) participants shows that only about half that level (42%) actually meet a minimum level of diversification. Of course, that confidence may be a bit dented at the moment – the survey was conducted last August.

As for how participants evaluate that performance, the survey’s authors say that the most common selection for how participants evaluate their investment performance: “If I make money, it’s good. If I lose money, it’s bad.”

The 2008 Individual Retirement Planning Behaviors and Attitudes Survey from BPS&M focuses on the three behaviors required to prepare for retirement: plan participation, adequate contributions, and investment diversification.

Participation Drivers


Survey respondents say participation in a plan is often driven by feeling the need to save in order to retire comfortably, followed by matching contributions and tax advantages. The most common reason employees don’t participate: they cannot afford to have more money come out of their paycheck (only 12% of respondents had household incomes greater than $100,000).

Most participants surveyed view automatic enrollment positively, with 60% agreeing that employers have a responsibility to automatically enroll employees in the retirement plan.

Most respondents understand the need to save, but they want and need more education from employers on how to determine an appropriate savings rate. In fact, a third of employees wouldn’t even venture a guess about how much they need to save each year to have enough income during retirement. Of those who did, many employees had high estimates of how much they need to save each year to have a comfortable retirement, with the mean estimate being 19% of their income saved annually, through both their own contributions and those of their employer.

Most say they would sign up for a program that automatically increases their contribution rate a little bit each year, though the actual adoption rate for such programs has traditionally tracked well below that level of acceptance.

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Survey results can be obtained by contacting BPS&M at 615-665-5335 or BPSMsurvey@wellsfargo.com.

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