updated 7/7/2009 3:36:37 PM ET 2009-07-07T19:36:37

A new study of 401(k) plans has revealed that black and Hispanic workers save significantly less for retirement and tap into their accounts more frequently than white and Asian employees.

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The study of 3 million 401(k) plans at more than 50 large companies concludes that unless some changes are made to encourage more saving by some minority groups, they run the risk of retiring into poverty.

The analysis, released Tuesday, was done by business consultant Hewitt Associates and a nonprofit educational foundation of Chicago-based Ariel Investments.

It shows 66 percent of black employees and 65 percent of Hispanic workers participate in their company's 401(k) plan while 77 percent of white workers and 76 percent of Asians enroll.

Black and Hispanic workers also contribute at much lower levels, the study shows.

Among those who save, white employees contributed 7.9 percent of income, compared with Hispanic workers, who contributed 6.3 percent and black workers, 6 percent.

Asian workers contributed most at 9.4 percent.

Lower contribution rates means black and Hispanic workers have lower account balances at all pay levels.

Among employees earning between $30,000 and $59,999 black workers have saved $21,224, Hispanics, $22,017 and Asians have set aside $32,590. White workers saved $35,551.

A similar disparity was noted at higher pay levels, the study authors said.

Since 401(k) plans are now the primary retirement savings tool and the savings disparities are so significant, it's apparent that minorities are likely to retire with less financial security, said Mellody Hobson, president of Ariel Investments.

"Without a significant effort to improve savings and investing behaviors, African-American and Hispanic workers are in danger of retiring into poverty," she said in a statement.

Less likely to invest
The study also shows black and Hispanic workers are less likely to invest in stocks, further reducing the potential earnings over time.

In addition, black workers are more likely than the study population overall to have a loan and are more than twice as likely to take a hardship withdrawal from their 401(k) plans.

Nearly two of every five black workers and almost a third of Hispanic workers borrowed from their retirement accounts compared to just one in five white workers.

The study authors recommend five policy changes to boost savings rates among minority workers:

1. Encourage employers to voluntarily collect and report 401(k) plan data by race and ethnicity to highlight where gaps exist among workers.

2. Modify loan requirements to decrease the likelihood of default by extending the amount of time a departing employee has to pay off a loan.

3. Mandate financial education in private and public schools to boost financial literacy.

4. Design 401(k) plans in a way that benefits a broad, diverse employee base including automatic enrollment with high default contribution rates and periodic contribution increases.

5. Create user-friendly and easily understood communication to help workers effectively manage and grow their savings. Communication should incorporate different cultural perspectives that resonate with diverse groups of employees, the study authors said.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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