Why Some Blacks Not Ready for Retirement

ByABC News via logo
January 19, 2004, 12:29 PM

Jan. 20 -- Although African-Americans have made great advancements since the civil rights movement, there are still significant disparities between blacks and whites when it comes to building wealth and preparing for retirement.

Blacks have less wealth than their white counterparts and in particular, less money saved for retirement, meaning that a burgeoning black middle class may not have the means to retire comfortably. That shortfall may impact everyone, from black citizens themselves, to others who must pay higher taxes to support them.

Lagging Wages

According to 2002 census figures, black men still earn roughly 25 percent less than their white counterparts who have the same level of education.

Specifically, the median income for a black man with a high school diploma was $27,224 in 2002, compared to $35,738 for whites. For those with higher educations, the discrepancy is even wider. The median income for a black man with a master's degree was 27 percent less than his white counterpart: $50,763 for blacks versus $69,655 for whites.

Black women also earn less than their white counterparts, although the differences are smaller. Black women with high school degrees earn 12 percent less than whites, while black women with master's degrees earn 6 percent less.

Investing Habits

The wage discrepancy harms African-Americans in more ways than one, as income levels are one of the most important factors motivating blacks to invest (age is the biggest determinant for whites).

Over the past six years, Ariel Mutual Funds and Charles Schwab & Co. have partnered on the Black Investor Survey to better understand the investing patterns in the African-American Community as well as to draw attention to the need to build wealth within this community. Key findings of the survey reveal habits and perceptions which hinder wealth building.