It’s well known by now that in America’s latest recession, Blacks have faced burdens other ethnic groups have not. Not only are African-Americans losing their jobs and staying unemployed at disproportionate rates, they’re then losing their wealth at disproportionate rates, also. Many African-Americans — such as David Banner, a rapper-turned-actor and now businessman, for instance — have been trying to teach Blacks about how best to protect themselves financially in this economy and beyond, but wealth continues to dwindle. And for some, desperate times are leading them to desperate measures.
According to a new study from Ariel Investments and Aon Hewitt, a human resources firm, African-Americans are eroding their 401(k) retirement plans at rates faster than their white, Latino and Asian counterparts. To be sure, a lot of people of all races dipped into their 401(k)s to ease some of the financial burdens they’re facing, but the numbers tell the deeper story:
African-American employees took hardship withdrawals more than any other ethnic group. Fully 8.8 percent of African-Americans took hardship withdrawals in 2010, compared to 3.2 percent of Hispanics, 1.7 percent of whites and just 1.2 percent of Asian workers.
Experts say many of the people dipping into their accounts or cashing them out completely will never be able to make up that money, putting them in a bad situation when it comes to their retirement.
As we’ve told you here before, a large number of Blacks feel unprepared to retire: “Forbes reports that a full 50 percent of African-Americans in the study said they feel ‘not very’ or ‘not at all’ prepared for retirement. By contrast, only 48 percent of whites and 44 percent of Asians said they feel unprepared.”
The greater point is that if you have a 401(k), it’s in your best interest to put off cashing it out for as long as possible. If the circumstances require that you have to take that money out as a last resort, so be it. But the key term in that last sentence is “last resort.”
If you can afford to not use your 401(k) money, you shouldn’t. Your 65-year-old self will probably thank you.
The opinions expressed here do not necessarily reflect those of BET Networks.
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