Does Ethnicity Play a Part in How You View Retirement Accounts?

Vanguard recently released a very interesting study titled, “Diversity and Defined Contributions plans: Loans and hardship withdrawals” which looked at the loan rates according to ethnicity across 7 defined contributions plans.  The sample size was almost 250,000 and was made up of active participants.  I don’t remember my 401(k) asking me my race/ethnicity, but apparently these plans did.

Even if you don’t read the entire study the Executive Summary Provides some interesting Statistics,

Early access. In our sample, 17% of active participants accessed plan savings through either loans or hardship withdrawals in the 12-month
period ended June 30, 2010. Twelve percent of active participants took one or more loans, 4% took one or more hardship withdrawals,
and 1% took both.

Loans. Blacks in our sample were 55% more likely to take a loan than whites or Asians during the 12-month period ended June 30, 2010. Hispanics were about one-third more likely to take a loan. However, black and Hispanic participants borrowed only a slightly higher fraction of their retirement account balance, and there was no meaningful difference in 12-month loan default rates among groups. This higher incidence of loans among blacks and Hispanics occurs after controlling for income, account balance, and other demographic differences.

***

Hardship withdrawals. Approximately 5% of the participants we studied took hardship withdrawals. Within this group, blacks were almost twice as likely to take a withdrawal as whites. However, they withdrew a smaller fraction of their account balance. Hispanics were about one-third more likely to take hardships as whites, and withdrew a similar fraction of their account balance as whites.

This leads to two questions for me:

  • Do Blacks and Hispanics care less about retirement because of financial education or culture?

OR

  • Do blacks and Hispanics have access to less traditional means of credit?

I believe its probably a mixture of both…but who cares what I think – what do you think it is? Why do Hispanics and Blacks have more qualified retirement loans? 

40 Responses to Does Ethnicity Play a Part in How You View Retirement Accounts?

  1. I believe you should not even be writing this right now.

    Misguided at best, racist at worst. Did you forget that people of color sometimes read your blog? Now I wish I didn’t.

    Let the white-guy-butthurt commence. Wah, poor you, I’m oversensitive and what have you.

    Maybe don’t write when you have absolutely no fucking idea what you’re talking about.

    Or at least don’t open the door for other non people of color to offer their racist drivel.

  2. “Do blacks and Hispanics have access to less traditional means of credit?”

    What the hell is this supposed to mean?

      • “This leads to two questions for me.”

        Questions that you really shouldn’t be asking, since within them is the poison of your ignorance–people of color are stupid and uneducated about retirement, and they have access to “non-traditional” (I don’t even want to know what that means, but I know it isn’t complimentary) forms of credit.

        If you’d just published the study and asked what people thought, it would be one thing. But you went on to speculate that certain people are ignorant about managing their finances due to their ethnicity…and then you say “it’s a mixture of both!” and completely skip over the idea that you could be completely, utterly, and downright disgustingly wrong with both your little theories.

        • So because I am white I can’t ask a question? I gave two hypothesis that could be off. Instead of screaming racism add to the conversation.

          WHY DO YOU THINK THEY ARE MORE LIKELY TO TAKE LOANS?

          • I am not screaming it. I am quietly and calmly stating it.

            I don’t know. Why are white people more likely to post inane garbage speculating about the actions of POC?

            • Again, you offer nothing to the conversation. I ask you once again, why is the fact, that Blacks and Hispanics in this instance invade their 401(k) more often?

      • I see that. I’m asking what you mean by “less traditional means of credit.”

        if you were reading, you’d know that.

        Oh, wouldn’t it be easier if only white people read your blog. Good news for you, you’re getting ever closer to having one less POC reading your blog.

        • Usually it means using credit cards, borrowing from friends or family, or taking out a loan. Maybe it’s a bigger question of the ability for minorities to secure loans or high credit limits?

          • I thought credit cards and loans WERE means of credit. Traditional or otherwise.

            So if credit cards are “non-traditional,” what forms are traditional?

            Also, what does minority mean? A minor person?

              • As a PERSON OF COLOR I prefer to be referred to as a person of color and not a “minority.”

                The idea is communicated without using a word that I , quite frankly, find offensive and demoralizing.

                • I’m sorry you feel offended by my language choice. Coming from a diverse background, I find it hard to pick one term that won’t offend one person/group or another. Seriously, it wasn’t my intentions at all.

        • I would have absolutely no resources to do that kind of research which is why I deferred to Vanguard’s very interesting study.

          Notwithstanding, I think I did put my thoughts out there although maybe not strong enough. I think it is a mixture of the two hypothesis I came up with.

  3. “I like how you deleted half of what I said.”

    Don’t know what you are talking about I don’t edit comments for the most part. Instead of whining – just say your point again.

    Can I implore, nay beg, you to add to the conversation instead of bitching and complaining that I am racist because I asked a question about a race/ethnicity that I am not?

    • Sure, but people aren’t little puppets you can pull the strings of. Usually, what you want me to do is what I don’t want to do, so you’re going to find yourself annoyed until you start wanting me to do what I want to do.

      Too bad.

        • It is too bad that you become aggravated at the slightest disagreement.

          You’re talking about a group of human beings I happen to belong to. I’m sorry, I’ll remember to be an emotionless robot next time, just for you.

          I suppose I do fit the stereotype–poor, shitty job, no money. Then I guess you must be right.

    • Oh my. How nice that your ethnicity, rather than your history of paying back your loans on time, is what a bank looks at.

      Never mind not holding water–institutional racism has a few similarities to drowning.

  4. First of all hispanic are white or black, so the study is wrong. If Vanguard wanted to reveal something it should stick to white, black and yellow. There is now green, brown or pink. Second it’s not about the race its about the education. The question is “Why we need a study like that? To show us what?”

    • What the hell are you talking about? are you diminishing one’s ethnicity? Because that is ridiculous.

      Second, why do you just assume it is education? it is like you didn’t even read the post!

      • I was referring to financial educations ( you ask us above “Do Blacks and Hispanics care less about retirement because of financial education or culture?
        “. And yes, I agree that due to poor financial education they don’t care much about this stuff.
        Regarding ethnicity – I was telling you that the Hispanic could be either black or white. ERGO you can not compare black people with Hispanic.

  5. “Care less about retirement” seems like a big stretch to me — people who take hardship withdrawals generally do it because they have a short-term need to keep themselves fed and sheltered, not because they don’t care about retirement.

    What I find interesting about this report is that per Figures 9 and 10, it indicates that while black people and women are more likely to take hardship withdrawals, the fraction of the account balance (and total amount) withdrawn is lower than it is for white people and men.

    I’ve got a vague hypothesis that perhaps the first group has less access to liquidity and informal credit (family lending, etc) and therefore may have to make a hardship withdrawal earlier in a crisis, while the second group can take advantage of other options, but when those are exhausted, have to withdraw a larger hardship amount.

  6. Did you leave one possibility out of the mix? Blacks and Hispanics may be more vulnerable to unemployment or more likely to be in low-wage jobs. If that’s the case, early withdrawals or loans may be a matter of necessity, rather than not caring about retirement or not understanding the consequences.

    Evan, my apologies if this comes thru to your comments board twice…fingers slipped on the keyboard, hit some unknown combination just as I was finishing the first effort at this profound and subtle remark, and disappeared what I was scribbling. Urk!

    • That could absolutely be the reason! I don’t have the stats, but I think the unemployment rate for those two groups of people are higher than whites.

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