New research put stark numbers to the retirement savings coverage gap for communities of color. Voya Financial uncovered striking differences in overall workplace retirement plan participation, savings rates, and average account balances for underserved employee communities.
For instance, Black and Latino employee participation rates were just 53% and 45%, respectively, compared to 66% for White employees and 62% for Asian employees.
While a healthy savings rate of 8% exists across all employees, savings rates among Black (7.1%) and Latino (6.9%) employees are still less than that of Asian (9.5%) and White (8.4%) employee populations.
Finally, the research found disparities in average balances among different employee communities, with White and Asian employee populations showing an average balance of $99,000 and $86,000, respectively, and $45,000 and $43,000 for Black and Latino employees.
Yet the analysis, released in a new white paper titled “Bringing greater financial equity to the workplace to support everyone’s opportunity for a better financial future,” also found that employers who implement inclusion best practices within their workplace retirement plan can see positive savings results on underserved employee populations.
“Over the last several years, employers have increased their focus on driving greater inclusivity, which has led to positive outcomes in the recruitment and retention of a more diverse workforce,” Rob Grubka, CEO of Workplace Solutions at Voya Financial, said in a statement. “Our research has found that employers can take this a step further by now focusing on opportunities to create greater value out of their benefits and savings programs by understanding and acting upon the unique needs of their employees.”
Key findings included the fact that while many individuals have faced financial hardship over the past several years due to the impacts of the COVID-19 pandemic, Black and Latino workers, in particular, experienced greater pay cuts and job loss, leaving little room to consider retirement savings as a priority. What’s more, U.S. Census data from 2020 shows that Black Americans were twice as likely as White Americans to live in poverty, with a median Black household earning just 61% of the median White household.
Voya’s research also confirmed that the retirement savings gap closes significantly in plans that offer automatic enrollment. Black and Latino employees have a two to three times higher participation rate than their peers at employers who do not offer automatic enrollment.
Specifically, employer plans that do not automatically enroll employees into their workplace retirement plan have active participation rates of 49% for White employees, 46% for Asian employees), 34% for Latino employees, and 31% for Black employees.
Yet plans that automatically enroll employees show far greater active participation rates of 92% for Asian employees, 90% for White employees, 88% for Latino employees, and 87% for Black employees.
“Features such as auto-enrollment seemingly not only increase overall plan participation but also show an opportunity to help close gaps among all employee populations,” Grubka concluded. “And while delivering financial best practices support through an inclusion lens takes effort and focus, the payoff can be transformative for underrepresented employees and their families.”