Black Retirement Fund Disparities: How to Save Money Now

h, retirement! It's that point in your life when you are ready to stop working and start relaxing and enjoying the rest of your life. Maybe even get some well-deserved travel in. Unfortunately, the pretty picture of retirement isn't so pretty for most Americans-and even worse for many Black Americans. In fact, just typing "Retirement Statistics 2013" in Google will give you results with words like "shocking," "disturbing," "terrifying" and "scary" in the headlines.

The Black retirement gap

According to a study conducted by the National Institute on Retirement Security, the average retirement savings account balance for White Americans, between the ages 55 and 64, was about $120,000. What's worse, the report states that the average account balance for African-Americans and Hispanics was a mere $30,000. Both amounts are too low to sustain retirees for the rest of their lives, but the gaps among the racial groups reveal an even bigger problem in the Black community.

The problem is much deeper than what the statistics show. According to Corey Trammell, financial advisor at Hantz Financial Services in Southfield, the disparity is most likely not due to a variation in saving habits but a variation in income.

Another issue, according to Trammell, is that most Americans-including Blacks-just don't know much about retirement. It's really no one's fault. He says many of the soon-to-be retirees' parents survived without having a lot of money in personal retirement accounts, and that their children are attempting to follow in their footsteps. Of course, their parents lived in a time where pensions and Social Security benefits often were big enough to take care of families alone. Trammell says Social Security is falling off and pensions are getting smaller-that's if you even have one.

"Really what it comes down to is retirement savings. It's not about Social Security anymore. It's not about pensions anymore. It's about what you put away in an IRA, 401(k), 403(b) or some type of retirement savings account," says Trammell.

Tammy Gibson-Reynolds, benefits and retirement specialist at Consolidated Financial Corporation in Southfield, says Social Security should be thought of as something extra and not a means to survive.

"The income people are retiring on is going to be almost 55 to 70 percent less than what they were making while they were working," says Gibson-Reynolds, adding that a lot of people fail to plan for inflation when thinking about retirement.

"When I sit down with clients, I try to make them look at that by giving them examples. 'What do you think the price of gas was 10 years ago? What about 10 years from that? What do you think inflation will be 10 years from now?'"

The only way to remedy this retirement gap between Blacks and Whites, and save up enough money to live comfortably during your retirement years, is to map out your plans and start thinking about your future as soon as possible. Normally, the age people start saving or even thinking about retirement is too late. The race has already started, and many Blacks are late from the starting line, which may account for them not having enough money to retire on.

There isn't a magical figure that fits all retirees. According to Gibson-Reynolds, those in the $50,000 to $80,000 annual income range, with pensions and Social Security, should have at least $300,000 in an IRA or 401(k). Many investment and human resource firms recommend having eight to 11 times your annual wages saved up in a retirement account. Depending on your income, that could be close to half a million dollars or well over. Trammell suggests accumulating at least a million dollars if you don't have a pension coming.

"People are living until they're 100 years old, and they're only getting older if you look at medical and technological advances. They've got 40 years to account for as far as retirement years," says Trammell, adding that lifestyles don't change. "If you normally spend $50,000 a year, you want to have at least $50,000 a year set aside for your retirement years, if that's your only source of income."

Thinking about the lifestyle you want to have during your retirement will also help with deciding how much to save. Questions you should ask yourself include: Do you plan to travel? Staying in the house you bought for your big family? Do you plan to work part time?

Although most people tend to spend the same amount during retirement as they did in previous years, downsizing from a house to a smaller house or an apartment can cut some costs.

Gibson-Reynolds says a retirement plan isn't "cookie-cutter at all." That's why she and Trammell recommend going to see someone about your finances yearly. Going to a financial advisor or a retirement expert will help you figure out the plan that's best for you on your journey to a stress-free retirement.