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View More Press Releases by Ariel Capital Management, LLC

Press release:

9th Annual Ariel/Schwab Survey Shows Blacks & Whites Differ in Expectations and Strategies for Retirement

Issued by: Ariel Capital Management, LLC

Date: June 23, 2006

NEW YORK -- With traditional sources of retirement funding in flux, including corporate pensions and Social Security, Black and White Americans differ in their expectations about retirement, according to the 9th Annual Ariel/Schwab Black Investor Survey. While more Blacks than Whites participate in employer pension plans and large numbers of both groups are concerned these plans are in jeopardy, fewer Blacks than Whites (26% versus 30%) say they are worried about their retirement.

The annual survey of 500 Blacks and 500 Whites earning over $50,000 also finds Blacks plan to retire earlier and are pursuing different strategies than Whites for their retirement years, such as investing in real estate or opening a business.

Investing in the market continues to lag among Blacks. In fact, the percentage of higher income Blacks with stock investments is trending downward from a high of 74% in 2002 to 64% this year. The number of higher income Whites with stock investments (83%) is virtually unchanged since the first year of the poll in 1998.

Blacks Are Banking on the Pension Promise

An important difference between Black and White retirement funding is that Blacks are significantly more reliant on employer pensions than Whites. Of those surveyed, two-thirds of employed Blacks -- compared to about half of employed Whites -- work for organizations with a traditional pension plan. This reflects the fact that far more Black than White employees surveyed (44% versus 25%) work for government, which is more likely to offer pension plans.

Although, almost 90% of both groups surveyed consider themselves "very responsible" for preparing for their own retirement, Blacks are more likely than Whites to feel responsibility also should be shared by corporations (by a 38% to 25% margin) and by the government (by a 35% to 18% margin).

Large percentages of both Blacks and Whites (50% and 55%) believe corporate pension funds will no longer exist in a decade, but far more Blacks than Whites (65% versus 37%) agree that "when corporate pensions go bankrupt, the government should be responsible for paying those people who were counting on their pensions." All else being equal, Blacks are twice as likely as Whites to believe government and corporations bear significant responsibility for ensuring Americans achieve a comfortable retirement.

Ariel President Mellody Hobson said: "All across America corporate pension funds are being frozen and many government pension systems are underfunded. It's a national crisis that will hit Blacks especially hard because we've all bought into the promise."

Redefining Retirement: The Dream of Entrepreneurship

Despite uncertainty in the pension world, Blacks are optimistic that they will retire early, with twice as many Blacks as Whites hoping to retire before the age of 60. However, the survey suggests that for many Blacks, retirement is just the beginning of a new phase of work. While both groups have similar aspirations for retirement (maintain standard of living, travel more, etc.), three times the number of Blacks versus Whites (29% versus 10%) say they plan to start a business after they retire.

In addition, more Blacks than Whites own real estate other than their home (42% versus 33%) and of these, more Blacks than Whites (58% versus 48%) say they expect these investments to help fund retirement. Furthermore, twice as many Blacks as Whites (34% versus 16%) say they are currently saving to buy real estate, start a business, or both.

Lisa Toppin, a director of human resources and diversity programs with Charles Schwab & Co., Inc., said: "Placing bets on real estate or starting a small business during your retirement years can be a risky proposition, since it doesn't leave much time to recover if things don't go as planned."

Less Savings and Greater Family Burdens Can't Quell Optimism among Blacks

Blacks remain less worried about retirement despite having far less money saved in retirement accounts (the median amount saved is $59,000 for Blacks versus $93,000 for Whites). Blacks contribute less to their retirement accounts monthly (the median monthly contribution is $254 for Black employees compared to $306 for White employees). Lastly, when asked about other retirement savings outside retirement accounts, the median amount for Blacks who have such savings is $36,000, compared to $75,000 for Whites.

Blacks also have family issues that compound the gap. The survey found Blacks receive less financial support from their parents and carry heavier financial burdens related to aging parents, adult children as well as other relatives. According to the survey, 27% of Blacks versus 18% of Whites have an adult living in their home other than a spouse. Only 21% of Blacks compared to 35% of Whites have received an inheritance, and only 18% of Blacks versus 34% of Whites expect to receive one in the future. Blacks who are concerned about saving for their children's education or those who are worried about caring for elderly parents are considerably less likely to be saving even $100 per month for retirement. Blacks who have extended family living with them are much more likely than others to be worrying about their retirement.

Ariel's Hobson concluded: "For all of the uncertainty surrounding retirement and the challenges unique to our community, it is inspiring that Blacks remain positive. It is my hope we can convert this optimism into real wealth-building that empowers African-Americans and gives future generations the opportunity to succeed."

The random sample survey of 500 Black and 500 White households earning over $50,000 annually is the ninth for Ariel-Schwab. It was conducted by telephone between April 26 and June 4, 2006 by Argosy Research. The margin of error is approximately 4.5%.

View More Press Releases by Ariel Capital Management, LLC

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