Morningstar Retirement, Defined Contribution Institutional
Investment Association, and Aspen Institute Financial Security
Program release first report to address race and gender disparities
in 401(k) plans
The Collaborative for Equitable Retirement Savings today
published its first report, “Racial and Gender Disparities in
401(k) Account Balances: How Large are They and What is Causing
Them?” It examined anonymized 2022 data from nine 401(k) plan
sponsors across approximately 180,000 active plan participants and
found that, even after controlling for salary and tenure,
significant race and gender disparities remain in account balances.
The report attributes those differences to variations in
contribution, loan, and preretirement withdrawal behavior.
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The Collaborative—including Morningstar Retirement, Defined
Contribution Institutional Investment Association (DCIIA), and the
Aspen Institute Financial Security Program—was formed in 2023 as a
multi-stakeholder initiative to understand the complex decisions of
savers and make retirement savings more inclusive and
efficient.
Additional findings from the first report include:
- Black and Hispanic females contribute lower percentages of
their salaries than their counterparts after controlling for age,
salary, tenure, and plan design variables.
- Black and Hispanic workers withdraw a larger portion of their
account balances before retirement and take these preretirement
withdrawals more frequently than their white counterparts. These
differences grow more extreme the closer people get to
retirement.
- Black participants have a higher probability of having an
outstanding loan than their white counterparts. At ages 55-59, both
Black men and Black women have a 49% probability of having a loan
outstanding.
- The report’s simulation results indicate that eliminating
preretirement withdrawals would substantially mitigate race and
gender disparities, particularly for early- and mid-career 401(k)
participants.
“It’s well known that there are racial and gender disparities in
retirement account balances, but these disparities are not fully
explained by different economic circumstances such as income or
tenure,” said Jack VanDerhei, director of retirement studies for
the Morningstar Center for Retirement & Policy Studies and the
report’s lead author. “This paper is the start of a multi-phased
effort to model the effects of these disparities and test the
effectiveness of different steps employers and policymakers could
take. Our initial findings suggest that reducing preretirement
withdrawals can significantly narrow racial and gender disparities
in 401(k) outcomes.”
“Through CFERS, we are working to ensure that retirement plan
participants can reach their retirement and broader financial
goals. Examining the retirement savings data, and the underlying
behaviors, around the existing disparities has unveiled preliminary
insights that will help the retirement savings system evolve to
address the racial and gender wealth gap,” said Lew Minsky,
president and chief executive officer of DCIIA.
“Retirement savings are the second largest source of household
wealth in the U.S., which means that our efforts to close larger
racial and gender wealth gaps require a retirement savings system
that works for everyone,” said Karen Biddle Andres, director of
impact strategy and partnerships at the Aspen Institute Financial
Security Program. “This report signals that minor plan and benefit
changes can likely translate to significant increases in the
retirement savings balances of Black and Hispanic households in
particular. Continuing this level of cross-sector collaboration,
testing, and innovation will help our retirement savings system
realize its promise in Americans’ financial lives.”
The Collaborative’s first publication is focused on its first
two of five phases of analysis. The five phases are: identifying
existing racial and gender disparities in account balances after
controlling for salary and tenure; identifying the causes of such
disparities by analyzing race/gender differences in participation,
contribution, asset allocation, and loan and preretirement
withdrawal behavior; incorporating a stochastic accumulation model
to show how these disparities will evolve by retirement age;
focusing on how plan design, benefit, and policy changes are likely
to influence disparities; and incorporating the stochastic
decumulation module from the Morningstar Model of U.S. Retirement
Outcomes to allow for the analysis of various risk management
techniques. A summary of the first report can be found here.
About The Collaborative for Equitable Retirement
Savings
The Collaborative for Equitable Retirement Savings is a
multi-stakeholder initiative in the U.S. that aims to make
retirement savings more inclusive by addressing and mitigating race
and gender disparities in 401(k) plans. The coalition analyzes
challenges and opportunities for equitable retirement savings
through data-driven research and analysis; champions policy changes
and best practices for employers and recordkeepers to promote
diverse participation and savings in 401(k) plans; provides
resources and tools to raise awareness about retirement savings
disparities and empower individuals to make informed decisions; and
brings together key stakeholders from across the retirement
industry to work towards solutions. For more information, visit
https://www.cfers.org.
About Morningstar Retirement
Morningstar Retirement empowers investor success by providing
research- and technology-driven products and services that help
individuals reach their retirement goals. With advisory services
provided by Morningstar Investment Management LLC, Morningstar
Retirement supports and collaborates with workplace retirement
plans and other industry players to differentiate their services,
stay competitive, and reach new markets, all in service of building
a better retirement system. Morningstar Retirement not only helps
people save for the retirement they want but helps them make their
money last once they get there.
About The Morningstar Center for Retirement & Policy
Studies
The Morningstar Center for Retirement & Policy Studies has
the mission to help improve the U.S. retirement system by arming
decision- and policy-makers with unbiased and actionable data and
analysis. The Center draws on the capabilities of Morningstar
Retirement to fuel its commitment to helping people achieve better
retirement outcomes.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent
investment insights in North America, Europe, Australia, and Asia.
The Company offers an extensive line of products and services for
individual investors, financial advisors, asset managers and
owners, retirement plan providers and sponsors, and institutional
investors in the debt and private capital markets. Morningstar
provides data and research insights on a wide range of investment
offerings, including managed investment products, publicly listed
companies, private capital markets, debt securities, and real-time
global market data. Morningstar also offers investment management
services through its investment advisory subsidiaries, with
approximately $286 billion in assets under advisement and
management as of Dec. 31, 2023. The Company operates through
wholly- or majority-owned subsidiaries in 32 countries. For more
information, visit www.morningstar.com/company. Follow Morningstar
on X @MorningstarInc.
About Defined Contribution Institutional Investment
Association (DCIIA)
Founded in 2010, DCIIA is a non-profit association dedicated to
enhancing the retirement security of America’s workers. DCIIA’s
300+ member organizations include investment managers, consultants
and advisors, law firms, recordkeepers, insurance companies, data
providers, plan sponsors (through the Plan Sponsor Institute) and
others who are collectively committed to the best interests of plan
participants. DCIIA also conducts proprietary research and
participates in industry collaboration on retirement topics via the
DCIIA Retirement Research Center. DCIIA is the association partner
of the Journal of Retirement. For more information, visit:
www.dciia.org.
About the Aspen Institute Financial Security Program
The Aspen Institute Financial Security Program’s (Aspen FSP)
mission is to illuminate and solve the most critical financial
challenges facing American households and to make financial
security for all a top national priority. We aim for nothing less
than a more inclusive economy with reduced wealth inequality and
shared prosperity. We believe that transformational change requires
innovation, trust, leadership, and entrepreneurial thinking. Aspen
FSP galvanizes a diverse set of leaders across the public, private,
and nonprofit sectors to solve the most critical financial
challenges. We do this through deep, deliberate private and public
dialogues and by elevating evidence-based research and solutions
that will strengthen the financial health and security of
financially vulnerable Americans. To learn more, visit
AspenFSP.org, join our mailing list at http://bit.ly/fspnewsletter,
and follow @AspenFSP on X and LinkedIn as The Aspen Institute
Financial Security Program.
©2024 Morningstar, Inc. All Rights Reserved.
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