New research analyzes retirement plan participation and savings behavior by employees who work in historically black colleges and universities (HBCU), finding that many participants are contributing fewer dollars to retirement.
The findings from the TIAA Institute show that HBCU employees are contributing significantly fewer dollars to retirement, at 16% less in private schools and 30% less in public schools, compared to non-HBCU institutions. HBCU employees also had much lower retirement account balances after five years, were more than twice as likely to take a retirement plan loan and were likelier to take a hardship withdrawal from their retirement account after the age of 40, found TIAA.
The research studies data from 2019 and compares it to the retirement savings behavior of nearly 442,000 TIAA participants in 2022. Specifically, the research shows that compared to 2019, 13 times as many participants took hardship withdrawals in 2022, with HBCU participants 52% more likely to do so.
About one in eight HBCU participants (12.3%) had an outstanding loan over the two-year period. This was more than twice as likely compared to all other non-HBCU participants (5.7%) and those at peer institutions (4.9%).
“The evidence suggests that HBCU employees are more likely to access funds in their retirement account during working life, possibly signaling greater financial fragility,” writes TIAA Senior Economist Brent J. Davis and head of Research David P. Richardson.
TIAA says that plan sponsors of these institutions should act in providing advice and retirement plan savings features, while also taking note of potential systemic inequities that could impact the ability for participants to save for the long-term, such as racial gaps in pay, wealth, and the availability of employer-sponsored retirement plans.
The research also finds that employees at HBCU’s were likelier to seek advice online. Participants are more attuned to focusing on retirement income in their later years, either because of “lower accumulated savings, lower discounting of the future, or a better understanding of longevity risk,” according to TIAA.
Furthermore, TIAA writes that “the results suggest that continued innovation to workplace benefit plans, such as emergency saving accounts through payroll deductions, adding guaranteed income products or deferred annuities to a qualified default investment alternative, personalized financial advice, or better engagement strategies could improve retirement outcomes for HBCU workers.”
SEE ALSO:
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- Despite Financial Optimism, Black Americans Report Retirement Fears
- Most Americans Saving for Retirement, But Many Don’t Know How Much They’ve Saved
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
