Over the years, many financial institutions have conducted studies to get a better picture of the true state of the retiree in the years ahead.  The results that I have seen are troubling.  If workers do not change their courses of action soon, many households are headed for financial problems in their most critical years – during retirement.

Employees don’t understand fees

     According to a recent survey, many retirement plan owners realize that fees are an important consideration in choosing 401(k) investments.  However, similar to our lack of understanding about credit cards and their fees, many employees do not know how much they are paying in fees and expenses with their retirement accounts.  Many also do not feel knowledgeable about the impact that these fees can have on the growth of their retirement savings.

     The survey of retirement plan owners found that approximately two in three people reported that they did not pay fees with their 401(k) plans.  Almost two in 10 didn’t know whether they pay fees.  That amounts to 83% of people not understanding one of the most important savings vehicles that they have for protecting their financial future.

African Americans are at risk

     Another study found that African-American retirement strategies are specifically at risk.  In looking at the study on current retirees, three very critical observations stood out for me.

     First, the study found that African-American retirees are drawing about 10% less in retirement monies than their White retiree counterparts.  Second, they are also relying more on Social Security and employer pensions to fund their retirements, rather than on retirement plans and other savings and investments.  Finally, the study found that African Americans have saved, on average, only one-third of the funds saved by White retirees.

     Granted, it could be argued that less working income could play a strong role in these three observations.  I would agree with that statement – on the surface.

     Please do not misunderstand me.  I am not saying that it is financially possible for all households to save.  I realize that a lot of families, in all ethnic backgrounds, are living from check to check and are focused on just getting through the day.

     However, what really brought this to my attention was the fact that the study was able to hold those demographics constant and still find that African Americans were less likely than White counterparts (in the same age and income bracket) to save and invest.

    The study found that over the last decade, White investor participation has increased while African-American investing has not changed.  Just over half of African Americans are investing in the stock market.  That is such a small number in an age of technology, where we have access to vast amounts of information.

Identifying some of the problems

     Part of the problem is a lack of planning, and this is a problem across all cultural and ethnic lines.  The study found that about 45% of African Americans and 57% of Whites actually calculated how much they would need to save in order to retire.  That leaves more than half of workers guessing or gambling with their futures.

     Another problem is priority.  The study noted that fewer African Americans see retirement as a priority.  They are saving less because they are more worried about day-to-day expenses.

     This sounds like many of those surveyed are focused on instant gratification and making sure today is OK, rather than finding a balance between enjoying today while preparing for tomorrow.

     Again, I am not referring to any families who are struggling to make ends meet.  I am only speaking of those who could actually be doing more than they are doing now.

     The studies show that we need to plan more and get our priorities in order.  A failure to do so over the last decade has resulted in a lack of progress.  Let’s not let this next decade pass us by.