Women of Color Underprepared for Retirement

According to the survey from the State Farm Center for Women and Financial Services at The American College, nearly three in four women reported they considered saving for retirement as a high financial priority. Hispanic (67%) and Asian women (68%) were less likely than women in the general population (predominantly Caucasian, 73%) and African-American women (74%) to place an emphasis on retirement savings. 

Among Asian women, even those with higher incomes were less likely to prioritize accumulating assets for retirement. Those women who do not work with a financial adviser were less likely to say that saving for retirement was a high priority. 

In terms of retirement vehicles, workplace retirement plans were found to be the most common way women are saving for retirement. According to the survey report, seven in ten women overall (70%) have a defined contribution (DC) retirement plan through work. Another one in four (24%) have a traditional defined benefit pension (DB) plan. 

African-American women were more likely than average to report having both a DC (76%) and a DB plan (27%) available to them. Of those with a DC plan at work, nine in ten (89%) say they are currently contributing money. African-American women were found to be significantly more likely to say they were not contributing. 

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The report also found that Hispanic and African-American women were less likely to have individual savings and investment products. Hispanic women (37%) and, to an even greater extent, African-American women (31%) were less likely than others to report owning an IRA. Women in these two groups were also less likely to have stock and bond mutual funds, individual stocks and bonds, or annuities. 

Seventy-three percent of survey respondents expressed at least some level of concern about running out of money in retirement.  Just 28% of women are highly confident in their ability to calculate how much they need to save for retirement.

Expectations for retirement lifestyles, especially for working and housing in retirement, vary quite a bit and reveal troubling gaps in preparation, according to the report. For example, many Americans retire before they plan to, typically due to health issues that prevent them from working. Yet, many of the women surveyed for the report plan to work in retirement and may be planning on that income. Hispanic women were found to be especially likely to say they plan to work in retirement, and Asian and African-American women are more inclined than others to say they plan to start a business in retirement. 

Housing plays a vital role in retirement finances, says the report. Both Asian and Hispanic women suggest that they will alter their living situations in retirement. They are more likely than women in the general population and African-American women to say that they plan to downsize their housing in retirement or to live abroad during their retirement years.

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Half of survey participants agree that working with a financial adviser would help them achieve their financial goals. However, even among the more affluent respondents, women of color (29% Hispanic, 32% Asian and 29% African American) are less likely than women overall (43%) to be working with an adviser.

Women of color are more likely than the general population to think they cannot afford a financial adviser. In addition, only three in ten women, overall, feel confident in their ability to select the right adviser to work with. Twenty-three percent of all respondents indicated it is important to work with an adviser who specialized in women’s unique financial needs. 

The report suggests financial advisers and plan sponsors need to address the challenges that these women face. Steps should be taken to improve a sense of financial security, learn how to build cash reserves, plan for retirement, and manage personal risks. Related efforts include increasing outreach to women of color, reviewing their insurance protection, quantifying retirement-related goals, and recognizing family demands such as helping children with educational goals and home care of infirm relatives. 

The survey report is available here.