Sunday, July 26, 2015

The race-based wealth gap

What happens with employees investing in 401(k)s? The investment behavior of  9,600 Alcoa workers was examined between 2003 and 2010 for racial differences.  Outcome:  Blacks and Hispanics invested differently than whites.

  • Black and Hispanic employees were less likely to participate in the plans at all
  • minority contributors to the plans chose safer, low-returning assets like money market accounts than riskier fare like stock or bond funds
  • minority employees were more likely to make early withdrawals from their accounts, or take loans out against them
  • black salaried employees were less likely to participate in the plans than Hispanic or White salaried employees

Yet, at the end of the article, despite showing investing behavior was different,  the author still concluded “it’s important to keep in mind that racial inequality can manifest itself in many different ways, including some with the potential to perpetuate the disparity in our retirement years.”

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