Employer Retirement Plans Could Help Close the Gap Between White and Black Stock Market Participation
July 19 2005 - 9:01AM
PR Newswire (US)
Employer Retirement Plans Could Help Close the Gap Between White
and Black Stock Market Participation NEW YORK, July 19
/PRNewswire-FirstCall/ -- For African-Americans, who have
historically lagged Whites in stock market participation, employer-
sponsored retirement plans have the potential to be an effective
entree into the world of investing, according to the 8th Annual
Ariel-Schwab Black Investor Survey. The survey finds that
African-Americans who are saving primarily for retirement are
almost twice as likely to be stock investors as those who are
saving for other reasons, such as to pay for education. Whites,
however, are equally likely to be investors regardless of their
saving and investment goals. The percentage of higher income Blacks
(households earning over $50,000 annually) who own stocks or mutual
funds continues to lag behind higher income Whites, with 65% of
Blacks vs. 80% of Whites invested in the market. Black investing
has fluctuated over the years from a low of 57% in 1998 to a high
of 74% in 2002; the corresponding figures for Whites have remained
statistically flat, hovering around 80%. Carla A. Foster, a vice
president with Charles Schwab Corporation, believes that one way to
continue to narrow the investment gap between Blacks and Whites is
through employer-sponsored retirement plans. "We know that
retirement planning is a gateway to investing for many individuals,
but we learned that it is truly the key driver for
African-Americans." Retirement plans: leveling the playing field In
previous years, the Ariel-Schwab Black Investor Survey has shown
differences between Blacks and Whites in their investing habits and
attitudes, such as a greater distrust of the stock market by Blacks
and a greater familiarity with the market by Whites. However, this
year's survey shows that among those who participate in 401(k)s and
other employer-sponsored retirement plans, African-Americans and
Whites have some striking similarities. The responsibility that
plan participants take in making investing decisions is one
example: similar percentages of Blacks and Whites seek help from
advisors (36% of Blacks vs. 39% of Whites) or manage their own
retirement portfolios (39% vs. 41%). Additionally, 25% of Blacks
and 21% of Whites initially choose their retirement investments,
but rarely if ever make changes to their portfolio. Ariel Capital
Management President Mellody Hobson said, "A lot of us in the
African-American community didn't grow up talking about the stock
market around the dinner table, but now we are talking about it
around the water cooler." Employers are key to increasing
retirement savings Still, there are challenges to relying on
employer sponsored retirement plans to close the gap in stock
market participation, the survey found. Fewer Blacks than Whites
overall (45% vs. 60%) consider retirement their most important goal
for saving. Blacks who are investing regularly in retirement
accounts contribute an average of $65 per month less than Whites
($210 vs. $275). Additionally, significantly more Black plan
participants than White participants have withdrawn money from
their accounts prior to retirement (36% vs. 24%); in fact, after
controlling for age, income, and other demographic variables,
Blacks are 72% more likely to have withdrawn money early from a
plan. This year's survey also suggests, however, that employers can
play a key role in helping Blacks save more for retirement. The
survey found that all else being equal, Blacks who have help from a
financial advisor contribute more money on a monthly basis to their
retirement plans than do those who go it alone. Additionally,
Blacks showed a stronger preference for receiving information on
their retirement plans through one-on-one meetings with benefits
advisors (49% for Blacks versus 42% for Whites) or in seminars (27%
versus 16%.) Fewer Blacks than Whites want information through
e-mail (Blacks 28% vs. Whites 37%) or the web (Blacks 28% vs.
Whites 34%). Hobson said, "If we can raise the comfort level
through more personalized service and stronger communications, we
will see a leveling of the playing field." Furthermore, the survey
shows Blacks are particularly receptive to information about and
help with retirement investing provided by their employers. Among
both Blacks and Whites with employer-sponsored retirement plans,
three out of four consider automatic payroll deductions to be "very
valuable" features of their plans. But significantly more Blacks
than Whites (63% vs. 53%) view "communications and tools provided
by your employer" and "the ability to invest in company stock" (53%
Blacks vs. 40% White) to be "very valuable." "The financial
services industry and employers are really partners in the effort
to educate investors," said Foster. "People turn to their companies
for information and they naturally believe their employer will not
only support them as they work but will also provide them with a
solid foundation for a secure retirement." Blacks think home
ownership before stock ownership Foster also said that lower levels
of home ownership among Blacks than among Whites (77% for Blacks
versus 90% for Whites) partly explains why fewer Blacks invest in
stocks. "If you're saving for a more immediate need -- like a down
payment -- it's harder to set aside money for a long-term goal,"
she noted. The preference of Blacks for real estate investments
continues, though it is down considerably from last year when
record-low interest rates and the volatile stock market drove more
people to invest in real estate. This year, 54% of Blacks versus
39% of Whites view real estate as the "best investment overall,"
ahead of stocks, bonds, mutual funds and insurance. Last year, 61%
of Blacks and 51% of Whites chose real estate as the best
investment. In another finding, 61% of Blacks and 55% of Whites
view home improvement as a better investment than the stock market;
two years ago the corresponding figure was 76% for Blacks and 64%
for Whites. "After the Bear market, everyone shifted their
preference to real estate, but the bloom is off the rose," said
Hobson. "Still, many high-income Blacks -- like their grandparents
-- still want to invest in something they can see and touch." The
random sample survey of 500 Black and 500 White households earning
over $50,000 annually is the eighth for Ariel-Schwab. It was
conducted by telephone between March 18 and April 8, 2005 by Argosy
Research. The margin of error is approximately 4.5%. Ariel Capital
Management, LLC and The Charles Schwab Corporation are separate
entities, but co-sponsor the "Black Investor Survey." Ariel Capital
Management, LLC is a Chicago-based institutional money management
firm and mutual fund company with more than $21 billion in assets
under management. Ariel serves individual investors through its
no-load Ariel Mutual Funds and manages separate accounts for
institutional clients. Ariel's web site is
http://www.arielmutualfunds.com/. The Charles Schwab Corporation
(NYSE:SCH), through Charles Schwab & Co., Inc. (Member
SIPC/NYSE), U.S. Trust Corporation, CyberTrader, Inc. (Member
SIPC/NASD) and its other operating subsidiaries, is one of the
nation's largest financial services firms serving investors through
offices, regional client telephone service centers and automated
telephonic and online channels. The Charles Schwab, U.S. Trust and
CyberTrader Web sites can be reached at http://www.schwab.com/,
http://www.ustrust.com/ and http://www.cybertrader.com/,
respectively. (0705-8433) To download the 2004 Black Investor
Survey, log on to http://www.arielmutualfunds.com/ or
http://www.aboutschwab.com/. DATASOURCE: Charles Schwab CONTACT:
Renee E. Warren or Stella Brown, both of Noelle-Elaine Media, Inc.,
+1-646-424-9750 Web site: http://www.schwab.com/
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