Economic snapshot | Race and Ethnicity

Blacks and Hispanics Are Falling Behind Whites in Retirement Coverage

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The shift from traditional defined-benefit pensions to 401(k) plans over the past two decades has left the vast majority of Americans unprepared for retirement. Minority workers have been disproportionately affected. In 1990, black workers were almost as likely as white workers to have pensions, as shown in the figure below. Over the next two decades, blacks started falling behind whites.  By 2010, only 43 percent of black workers age 26-61 were participating in an employer-based retirement plan, compared to 50 percent of white workers the same age. Hispanics, meanwhile, who already lagged behind both groups, fell even farther behind.

Retirement Inequality Chartbook | Figure 22

Share of workers age 26–61 participating in an employer-based retirement plan, by race/ethnicity, 1989–2010

Year White, non-Hispanic Black Hispanic
1989 48% 47% 32%
1990 49% 49% 33%
1991 49% 48% 33%
1992 50% 48% 33%
1993 50% 46% 32%
1994 50% 43% 32%
1995 51% 49% 32%
1996 52% 49% 31%
1997 52% 48% 35%
1998 53% 48% 32%
1999 55% 49% 36%
2000 56% 50% 36%
2001 56% 48% 35%
2002 55% 48% 33%
2003 53% 46% 30%
2004 53% 48% 31%
2005 53% 47% 30%
2006 52% 45% 29%
2007 50% 43% 28%
2008 53% 45% 29%
2009 51% 43% 29%
2010 50% 43% 27%

Note: In this figure, “black” and “Hispanic” are not mutually exclusive categories, so a black person of Hispanic origin will be included in both categories.

Source: Authors' analysis of Current Population Survey data from the Integrated Public Use Microdata Series (King et al. 2010)

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The most likely cause is the shift from traditional defined-benefit pensions to 401(k) plans. While most 401(k) participants are required to contribute to these plans in order to participate, workers are automatically enrolled in defined-benefit pensions and, in the private sector, are not required to contribute to these plans. Thus, blacks and other groups with less discretionary income are less likely to participate in 401(k) plans. In addition, lower-income workers are less likely to work for employers who provide benefits (including matching 401(k) contributions) and receive less of a tax break for participating in these plans. To learn more about disparities in retirement preparedness and outcomes, see the full report Retirement Disparities Chartbook: How the 401(k) Revolution Created A Few Big Winners and Many Losers.

 


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