The index, which tracks the relative attractiveness of
annuitizing pension liabilities, increased from a value of 97.10 to 97.12 as of
December 1—the last measurement scheduled for 2013. The index’s current annuity
discount rate proxy is up five basis points over the previous month’s results,
reaching 3.26%.
As such, the environment to transfer pension liability
continues to improve and remains strong as 2013 comes to a close, says Geoff
Dietrich, vice president of Dietrich & Associates, which maintains the
index.
“Plan sponsors who actively considered their insured risk
transfer options in 2013 are now harvesting their efforts,” Dietrich says. “The
increase in activity is a direct result of educated, risk-adverse sponsors who
understand their transfer options and the drivers behind affordability, in
connection with active monitoring of market conditions.”
The index provides a dynamically constructed, monthly
directional data point regarding the market conditions that affect settlement
costs. It is designed to provide pension stakeholders a mechanism for
monitoring settlement market conditions, and to support effective plan governance
and decisionmaking.
Only 54% of black and Asian employees and 38% of Latino
employees ages 25 to 64 work for an employer that sponsors a retirement plan,
compared to 62% of white employees, according to “Race and Retirement
Insecurity in the United States,” a paper from the National Institute on
Retirement Security (NIRS). A large majority of black and Latino working-age
households—62% and 69%, respectively—do not own assets in a retirement account,
compared to 37% of white households.
“I’m alarmed by the severity of the retirement racial
divide,” says Nari Rhee, Ph.D., report author and NIRS manager of research.
“It’s well documented that regardless of race, the typical working-age American
household is far off-track toward accumulating sufficient savings to meet their
basic needs in retirement. As we dig deeper into the data, we find an even
worse situation for blacks, Latinos and Asians.
“To further illustrate the extent of the racial divide, a
typical white household near retirement has nearly $30,000 saved in retirement
accounts, clearly an insufficient amount. A typical black or Latino household
near retirement fares even worse, with zero dedicated retirement savings in a
401(k) or IRA. For working-age households, the average retirement savings is
only about $20,000 among blacks and $18,000 for Latinos – a small fraction of
the $112,000 average among white households.”
She
adds, “With little else to depend on besides Social Security when they retire,
people of color are especially vulnerable to reliance on public assistance and
economic hardship in old age. Our research makes it clear that placing a
special focus on improving the retirement readiness for Americans of color is
absolutely essential to solve the national retirement crisis.”
The racial disparities are much more pronounced in the
private sector than in the public sector, research for the report found.
Blacks, Asians, and Latinos are respectively 15%, 13% and 42% less likely than
whites to have access to a job-based retirement plan in the private sector,
compared to 10%, 9% and 12% less likely in the public sector.
During a webinar about the findings, Rhee noted that black,
Asian and Latino workers are less likely to be employed in industries that
offer retirement plans, and are more likely to be in lower-wage jobs, which
discourages participation in retirement plans.
Households of color lag behind white households in coverage
by pensions that guarantee lifetime retirement income. While 24% of white
households have a pension through a current job, only 16% of households of
color do. This disparity is primarily due to the fact that just 12% of Latino
households are covered by a pension plan—half the rate of white and black
households.
Households
with pensions through a current job are more likely to have dedicated
retirement savings in a 401(k)- or IRA-type account than households without
pensions: 74% versus 66%, respectively, among white households, and 52% versus
40% among households of color.
According to the report, the racial gap in retirement
account ownership persists across age groups. Three out of four black
households and four out of five Latino households ages 25 to 64 have less than
$10,000 in retirement savings, compared to one out of two white households.
Among those near retirement, the per-household average retirement savings
balance among households of color ($30,000) is one-fourth that of white
households ($120,000).
Across age groups, households of color with at least one
earner are half as likely as white households to have retirement savings equal
to or greater than their annual income. For instance, only 19% of households of
color near retirement have this much retirement savings, compared to 41% of
white households of the same age.
During the webinar, Diane Oakley, executive director, NIRS,
said these findings show the importance of strengthening Social Security and
putting that on a sound basis so it remains a viable safety net for retirees.
She also contended lawmakers could expand the Saver’s Credit at a pretty modest
cost to cover more lower-income people. Finally, NIRS recommends regulators
look into ways to expand access to retirement plans.
The report serves as a companion to NIRS’ July 2013 study,
“The Retirement Savings Crisis: Is It Worse Than We Think?,” which documents a
significant retirement savings gap among working-age households in the U.S.
(see “NIRS:
The Retirement Crisis Is Worse Than We Think”). The research is based on an
analysis of data from the Bureau of Labor Statistics and the Federal Reserve.
“Race
and Retirement Insecurity in the United States” is available here.