There is a huge gap in retirement preparation of African Americans compared to white Americans, generally speaking. According to the Urban Institute’s Nine charts about wealth inequality in America:
African Americans Tend Not to Invest in Stocks
Some analysts also say that African Americans often shy away from investing in the stock market. “Whatever discretionary income we have, we tend not to invest in equities,” says Rockeymoore. “We don’t have a diversification.”
This may be due to a lack of comfort with the stock market. “African Americans are risk-averse,” says Deborah Owens, a former Fidelity Investments vice president who calls herself America’s Wealth Coach. “So, one of the major reasons they have less in retirement savings is they are ultra-conservative, particularly African Americans who work in the public sector and nonprofit organizations.”
Owens says black investors typically focus on guaranteed or fixed investments that are low-risk or no-risk. As a result, their retirement funds aren’t compounding at a high rate of return.
According to the Federal Reserve, the average balance of African Americans in 401(k)s is only $23,000. And Social Security and the Racial Gap in Retirement Wealth found the average balance for African Americans in pensions and IRAs was $10,300, vs. $105,600 for white Americans.
Owens believes many African American workers don’t take full advantage of all the choices in their employer-sponsored plans because they don’t understand them. “The tendency to be risk averse is directly correlated to their lack of knowledge,” she says.