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Blacks Optimistic About Retirement Future

ED GORDON, host:

Early retirement is, for many African-Americans, a dream. That's one thing you'll read in the latest Ariel/Schwab Black Investor Survey. Melody Hobson is President of Ariel Capital Management, a Chicago-based investment manager. The firm helped conduct the annual survey of 500 black and 500 white investors. Hobson says, overall, the survey showed blacks are upbeat about their golden years.

Ms. MELODY HOBSON (President, Ariel Capital Management): That optimism, I think, is really rooted in something that is going away, and that's traditional pension funds in this nation. We've counted on there being a safety net for us, that our pension from our corporation, as well as our Social Security payments, would take care of us in our retirement years. But, unfortunately, what we're starting to see in this country is that safety net has some major holes in it, and now the individual is the only one who can shore up those holes.

GORDON: Here's another number that I found interesting, and I'm wondering how much this is really based in reality from what you know, Melody. And that's the idea that almost 90 percent of both groups surveyed considered themselves very responsible when preparing for their own retirement.

Ms. HOBSON: That's correct, and that was something that optimism, that sense of accountability was absolutely there with both groups, but there was a slight difference. African-Americans said, okay, if my pension fails, the government is responsible for stepping in and making sure I have a pension in my retirement years. And white Americans were much less likely to think that the government had that responsibility.

GORDON: And we found this to be the case because more blacks than whites work for the government. Correct?

Ms. HOBSON: This is true. That is something that dates back to after the civil rights movement and some of the laws that came out. Some of the first places to open up for African-Americans was in government jobs, and certainly, we have been willing, in many ways, to take the lower pay of a government job that can exist at times, in order to get that pension promise.

GORDON: Let me ask you this. In terms of what we're finding in this survey -and we should note this is people who make $50,000 or more, so it doesn't speak to people under that threshold. Correct?

Ms. HOBSON: It does not. $50,000 in household income, so it could be you and your spouse or just you alone.

GORDON: All right. That being said, how prepared are most Americans really for retirement in terms of trying to sustain the lifestyle they now lead?

Ms. HOBSON: Well, I would say, in general, most Americans are woefully prepared for retirement, but I would say specifically African-Americans are even further behind the eight ball.

GORDON: What would you advise to be the best way to ready yourself for retirement if you find today that you're not ready at all, that you haven't really put aside that nest egg?

Ms. HOBSON: Well, the first thing I say, it's never too late to start. Secondly, even small amounts of money make a difference over time. Thirdly, I'd say don't count on Social Security or your pension. If they work out, that's terrific, but plan for the worst. Thirdly, I'd say, make sure you're investing outside of your employer-sponsored retirement plan or pension plan through IRAs.

GORDON: What about clients that you've talked to or just people on the street who pull your coattail for free financial advice, if you will, Melody, the idea that I'm sure some of them are very nervous when they see all of what has occurred over the last couple of years with pension plans, retirement funds, et cetera?

Ms. HOBSON: Well, absolutely, that is true. There's a great deal of nervousness. I actually, however, don't think it's totally sunk in, particularly with those in our community. I think we have still thinking everything will work out, and what's coming out in our survey. It's been very interesting, also, to see in our community we make points like, we don't think about retirement in a very traditional sense. We think that after we retire from our current job, we'll either start a new job or career or start a business.

And the idea of starting a business, becoming an entrepreneur, in sort of the twilight of your life is riskier than I could probably think of many other endeavors that you might consider. The entrepreneur's life is one of tremendous struggle, and, you know, as you get older, you may not have the energy or the intestinal fortitude or even the money, at some point, to be able to make those dreams a reality. And that is something that concerns me. So if people still choose to pursue that, which I think is a noble and wonderful goal, I just want to make sure they go into that situation fully prepared financially for the ups and downs that come, given the fact that we know most few businesses fail in the first year.

GORDON: Let me ask you this as an exit question, the idea of whether or not this is a pipedream, and that's early retirement. I know many of the people that you talked to in the survey suggested they want and are ready for early retirement, but how many of them are actually going to be able to make that goal?

Ms. HOBSON: I always believe in being incredibly honest, and I think that that is not a realistic scenario. Given where we are right now, in terms of that $59,000 saved for retirement, that is not enough money to retire comfortably, and I don't think it's realistic that we will retire as early as many in our community had hoped for.

GORDON: And is there a ratio to the salary you make in terms of what you should be putting away or what you should expect to be able to sustain yourself on when you try to project down the road what the cost of living will be?

Ms. HOBSON: Yes. You know, the rule of thumb that I've said, whatever you're living on and spending right now, you should basically just assume you will need that in your retirement years, which takes some people by surprise, because they think, oh, by then my home will be paid for and, you know, I will have less expenses. But what has changed that math is healthcare costs in this country, as well as the fact that at 65 years old, people are very vibrant and vital in this country, and they want to travel, they want to do things, and so just to maintain a sort of reasonable lifestyle, it takes money. Every little bit helps.

GORDON: Every little bit counts indeed. Melody Hobson, with the ninth annual Ariel/Schwab Black Investor Survey, we greatly appreciate your time.

Ms. HOBSON: Thank you.

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GORDON: That's our program for today. Thanks for joining us. To listen to the show, visit npr.org. NEWS AND NOTES was created by NPR News and the African-American Public Radio Consortium. Transcript provided by NPR, Copyright NPR.