May 22, 2013 at 10:47 AM ET
The new retirement age is getting younger for many Americans who can least afford to retire.
A new study released Tuesday by Prudential finds African-Americans retire earlier than the general population on average, despite significantly lower retirement savings.
About 25 percent of African-Americans surveyed expect to retire before age 60, compared to 20 percent of the general population. Among current retirees, the average retirement age for African-Americans is 56, according to the study, three years younger than the general population.
Yet African-Americans are also retiring with a far more meager financial cushion than average. Even if they participate in 401(k)s and other retirement accounts, the Prudential study found African-Americans have a median savings of $9,000 in their employer-sponsored plans, compared to $20,000 among the general population.
"If you couple the fact that African-Americans are retiring earlier with smaller balances (in retirement savings), that really is a challenge for many families," says Michael Davis, a senior vice president for Prudential Retirement.
Lower balances are the result of several factors, the study found, including taking loans or withdrawals from plans before retirement age for immediate needs. "The number one financial priority that African-Americans identified was paying down debt," Davis says. "For the general population it was saving for retirement."
Seeking safety rather than growth has also hampered African-Americans' ability to build their nest egg. Nearly three-quarters of African-Americans surveyed have savings accounts, but they are half as likely to invest in IRAs and less likely to invest in 401(k)s than the general population.
Financial advisor Ivory Johnson says many African-Americans may not be as knowledgeable about the benefits of long-term savings and investments as other communities.
"We didn’t have grandpa to put his arm around our shoulder at the family gathering to say 'Son, this is how we pass wealth to the next generation, this is how you save money, these are the ways to protect what you have',” says Johnson, founder of Delancey Wealth Management. "Fortunately, we’re beginning to have these conversations and I believe the wealth gap will begin to narrow."
Worried about retiring with too little savings? Financial advisers say it's important to take these steps:
More information: Read the Prudential survey