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Study Links Race, Ethnicity to 401(k) Participation

July 8, 2009
Related Topics: Retirement/Pensions, Diversity, Latest News
White and Asian employees, regardless of pay, are far more likely to participate in 401(k) plans and to make bigger plan contributions than African-American and Hispanic employees, according to a new study.

Among those employees earning between $30,000 and $59,999, 75 percent of African-American and Hispanic employees participated in their employers’ 401(k) plans.

That compares with an average participation rate of 84 percent for Asian employees and 80 percent for white employees, according to a study conducted by Hewitt Associates of Lincolnshire, Illinois, and Ariel Education Initiative, a nonprofit affiliate of Chicago-based mutual fund provider Ariel Investments.

Participation rates also were linked to racial and ethnic backgrounds at higher income levels. For example, participation rates for those earning between $60,000 and $89,999 averaged 83 percent for African-American employees and 85 percent for Hispanic employees.

The participation rate averaged 92 percent for Asian employees and 88 percent for white employees in the $60,000 through $89,999 pay range.

At the highest income range, though, the differences in participation rates were much smaller.

For those with earnings of at least $120,000, the participation rate for Asian employees averaged 94 percent, compared with 92 percent for whites, 91 percent for African-American employees and 90 percent for Hispanic employees.

How much employees contributed to 401(k) plans also was directly tied to their racial and ethnic backgrounds. For example, on average, African-American employees earning between $30,000 and $59,999 deferred 5.9 percent of pay and Hispanic employees deferred 6.1 percent of pay to their 401(k) plans.

By contrast, Asian employees in the same pay range deferred an average of 8.4 percent of pay, while whites deferred an average of 7.1 percent of pay.

These racial and ethnic differences exist even at the highest income levels. For example, Asian employees earning at least $120,000 a year deferred an average of 12.1 percent of pay to their 401(k) plans, while white employees deferred an average of 10.4 percent. That compares with an average deferral rate of 9.7 percent for Hispanic employees and 9.2 percent for African-American employees.

The study also found that Asian and white employees, on average, take fewer hardship withdrawals and loans from 401(k) plans than African-American and Hispanic employees.

The study didn't attempt to analyze why participation and contribution are higher for Asian and white employees compared with African-American and Hispanic employees. Still, those differences need to be addressed “if retirement security is to be a reality for all Americans,” said Mellody Hobson, president of Ariel Investments, in a statement.

“A Study of 401(k) Savings Disparities Across Racial and Ethnic Groups—The Ariel/Hewitt Study,” funded by the Rockefeller Foundation, is based on 401(k) plan information—through December 31, 2007—for 3 million employees working at 57 large companies.

Summaries of the study are available at and

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail

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