Our current retirement system heavily relies on tax-advantaged savings accounts such as 401(k)s. This system works reasonably well in the world of upper-middle-class and affluent people. Unfortunately, that same 401(k) system functions quite poorly for most people outside that top economic layer. African-American and Hispanic workers are particularly unlikely to derive financial advantage from these arrangements. Median financial wealth is quite low for both groups, especially when compared with non-Hispanic whites.
You might think this has a lot to do with access to 401(k)s, but it turns out when the savings accounts are offered to workers at the same company, whites still benefit a lot more than Hispanics and African-Americans. A new working paper by Stanford’s Kai Yuan Kuan, Mark R. Cullen andSepideh Modrek examined 401(k) participation within a single firm from 2003 to 2010.
Kuan and colleagues find very large disparities in accumulated 401(k) savings. As you can see in this chart above, non-Hispanic white workers accumulated vastly more savings. Disparities would surely be even greater if their analysis included the stock market run-up through 2015.