African Americans face complex retirement planning challenges that are different from those of the general U.S. population, according to a study released Tuesday by Prudential.
The survey compared the financial situation of those who identify themselves as African American or black with people who have other ethnic identities. All respondents were between 25 and 70 years old and had household incomes of at least $25,000.
To start out with, African Americans have an average median household income of $61,000, about 20 percent lower than the $78,000 median household income enjoyed by the general population. They also tend to have saved less, with median household savings of $40,000, including retirement savings, compared to median household savings of $97,000, including retirement accounts, for the general population. About 45 percent of all adult African Americans participate in an employer-sponsored retirement plan, compared to 51 percent of the general population.
Family responsibilities weigh heavy in the African American community. Some 40 percent of African American households are headed by women with no partner or spouse, compared to 26 percent of female-only heads of household in the general population. On top of that, 33 percent of African American households are financially supporting children and grandchildren younger than 18, and 9 percent are supporting parents or grandparents. In the general population, only 25 percent support children younger than 18 and 4 percent support parents or grandparents.
These additional financial burdens make debt a big problem. African Americans have a median household debt of $18,000, not including home mortgages. That is about 50 percent higher than the household debt of the general population.
Nevertheless, on average, African Americans retire at 56, three years younger than the general population. Workers expect to be able to retire young, with 25 percent of nonretired African Americans saying they plan to retire before age 60, compared to 20 percent of the general population who say they'll take retirement before age 60.
Despite a heavy dose of what appears to be bad news, 50 percent of African Americans say they are better off financially now than they were a year ago, and 65 percent say they are far better off than their parents were. Those are encouraging signs that for many, retirement planning will eventually fall into place.