Group
Disparities in
Financial
Behaviors
and
Motivational
Tools Required
to Implement
Change
Presented By
Tamara D. Williams, MA
Chicago State University
Behavioral Groups
Gender
Race
Age
Sub-Topics
 Educational Attainment
 Socioeconomic Status
Financial Behaviors
for
Retirement
Seeking/Continuing
Financial
Literacy
Availability / Utilization of Employer
Provided Retirement Programs
Financial Planning
Saving
Gender Disparities
Women are more likely than men to:
 Experience
 Be
diverse work histories,
influenced by family responsibilities and
family life cycle stages across the life span,
 Be exposed to social roles beyond the work force,
encounter financial instability, and
 Live in retirement for a longer period of time
(Price, 1998).
Gender
(Financial Literacy)
There is a substantial difference between males
and females in financial knowledge at nearly every
age level, but particularly for older and younger
respondents.
 No significant financial knowledge difference
between women and men was noted for those aged
35-44 (Woodyard & Robb 2012).

Gender
(Employer Provided Programs)
 Women
were 1.1 times more likely than men to
work for an employer with a retirement plan
(Wright 2011).
 Minority
women and currently married women
were significantly less likely to work for an
employer with a retirement plan than their male
counterparts (Wright 2011).
Gender
(Financial Planning)
 Due
to increased earnings and work patterns
minority women, particularly Hispanic women are
projected to retire on their own earnings and they
will not be eligible for auxiliary benefits because
they typically do not meet the ten year marriage
requirement to earn them.
 There is also substantial difference between males
and females in financial planning at nearly every
age level also excluding ages 35-44, where men
plan more.
Gender
(Saving)
 Within
qualified savings plans women consistently
exhibit greater relative risk aversion. (Bajtelsmit,
Bernasek, and Jianakoplos 1999).
 The
fact that women tend to invest more
conservatively means that women may accumulate
less in total retirement assets over time (Bajtelsmit,
Bernasek, and Jianakoplos 1999).
Race
(Financial Literacy)
 Minorities
and low-income families are less likely
to have access to financial systems and literacy
programs.

In the United States, many low income and
minority families do not have checking, savings,
insurance, or retirement plans (Williams, Grizzell,
& Burrell 2011) .
Race
(Employer Provided Programs)
 Minority
status had a significant negative impact
on the likelihood of working for an employer with
a retirement plan (Wright 2011).
 The overall odds being about three fourths the
odds for nonminorities (Wright 2011).
 Racial differences in employer provided programs
may also be attributed to discrimination among
lenders. (Choudhury 2002).
Race
(Financial Planning)
 Less
than forty percent of African Americans and
Hispanics have asset income compared with more
than 60 percent of whites.
 Among current private sector workers aged 21 to
61, fewer minorities have pension coverage. The
rate has dropped significantly for all demographics
since the seventies, but the decline has been
greater for minorities (Hendley & Bilimoria 1999).
Race
(Saving)



White households have at least five times the wealth of
minority households yet earn, on average, just twice as
much as minority households (Choudhury 2002).
African-Americans are less likely than non-Hispanic
Whites to use housing dollars to generate home equity,
a major source of wealth in the United States (Dinkins
1994).
Non-Hispanic White families tend to be
disproportionately more likely to transfer wealth than
African-Americans (Choudhury 2002).
Age
(Group Disparities)
 There
are few age group differences in the practice
of preferred financial behaviors except for the
older population comprised of the Boomer
generation (Woodyard & Robb 2012).
 Baby Boomers are diverse with regard to race and
ethnicity. According to the U.S. Census Bureau
(2010), 42% of the population aged 65+ years in
2050 will be members of an ethnic minority group;
the fastest growing group is Hispanics.
Age
(Group Disparities)
Baby Boomers:
 More highly educated
 More likely to occupy professional and managerial
positions
 More racially and ethnically diverse than their
predecessors (Frey, 2010).
 Higher rates of separation and divorce and lower
rates of marriage
Age
(Group Disparities)
birth to fewer children (Hughes & O’Rand,
2004).
 On average, they are healthier and have longer life
expectancies at age 65 (Freedman, Martin, &
Schoeni, 2002; Manton, 2008).
 They have had more varied work histories, longer
transitions out of the labor force, and work for
more of their adult years (Quinn, 2010) than
previous generations.
 Gave
Age
(Financial Literacy)
 The
majority of workers (63 percent) would like
more education and advice from their employers
on how to reach their retirement goals.
 Workers were asked what would motivate them to
learn more about saving and investing for
retirement, the most frequently cited motivators
among workers of all generations were related to
making it easier to understand. (Collinson 2011).
Age
(Employer Provided Programs)
Boomers Compared Generation X & Millenials:
 Sixty-eight percent of workers have access to a 401(k) or
similar employee-funded retirement plan. Generation X (74
percent) are most likely to have access to a plan while
Millennials (62 percent) are least likely.
 Boomers were already mid-career when the retirement
landscape shifted from defined benefit plans to 401(k) or
similar plans provided by employers.
 They have not had a full 40-year time horizon to save in
401(k)s and enjoy the long-term compounding of
investments.
Age
(Employer Provided Programs)
 Generation
X is the first generation to have access
to 401(k)s for most of their working careers, and
they highly value them as an important benefit and
have high plan participation rates.
 Millennials most expect their primary source of
income in retirement to be self-funded. The good
news is that they are getting an early start with
their savings and are taking advantage of the latest
innovations that their employer-sponsored
retirement plans have to offer.
Age
(Planning)
 Millennials
(62 percent) are mostly likely to use a
professionally managed account and the majority
of Generation X (56 percent) does so as well.
 Baby Boomers are least likely (47 percent) to use
“professionally managed” accounts and more
likely (50 percent) to be do-it-yourselfers, setting
their own asset allocation percentages among
available funds in the plan (Special Issue 2012).
Age
(Saving)



Seventy-eight percent of workers are saving for
retirement either through retirement benefits, such as a
401(k) or similar plan, or outside the workplace.
Seventy percent of Millennials are already saving for
retirement and they are starting early: Starting at age 22
(median).
Generation X (83 percent) and Baby Boomers (81
percent) are saving for retirement but started at an older
age. Generation X started saving at age 27 (median),
while Baby Boomers got the latest start at age 35
(median) (Special Issue 2012).
Educational Attainment


The growth in educational attainment between 1970
and 2000 was greatest for black women, whose share
completing high school more than doubled and whose
share completing college more than tripled.
Although by 2000 the gap in educational attainment
between white and black women and white and
Hispanic women had dramatically decreased, white
women were still more likely than black and Hispanic
women to complete high school and college (Table 216
in U.S. Census Bureau, 2001).
Educational Attainment
(cont.)
 The
likelihood of working for an employer with a
retirement plan increased by almost 1.3 times for
men and almost 1.2 times for women for each
additional level of educational attainment (Wright
2011).
 Among households with less than a high school
education, home ownership rates for minorities are
considerably lower than those for whites, but the
gap shrinks among households with a college
education (Choudhury 2002).
Socioeconomic Status
(SES)
 Socioeconomic
status is positively related to
access in resource-rich networks. The higher the
individual’s socioeconomic status, the more
reliable their sources are (Williams, Grizzell, &
Burrell 2011).
 The poor’s sources do not have as extensive
financial knowledge or expertise as those who
higher in the socioeconomic ladder (Williams,
Grizzell, & Burrell 2011).
Socioeconomic Status
(SES)



Access to information regarding saving and investing
is rooted in broader systems of social inequality
(Williams, Grizzell, & Burrell 2011).
Higher SES individuals often work in less physically
demanding jobs (Li, Hurd, and Loughran 2008) and
may therefore have the ability to remain in the
workforce longer.
Work stress and a lack of personal control on the job
are more common among lower SES individuals
(Christie and Barling 2009).
Motivational Tools
Financial
Literacy
Early intervention
Projection Accuracy
Financial Literacy


Financial literacy - is generally accepted as the ability
to read, analyze, manage and communicate about the
personal financial conditions that affect the material
well-being.
This includes, but is not limited to, the ability to
discern financial choices, discuss money and financial
issues without (or despite) discomfort, plan for the
future, and respond completely to life events that affect
every day financial decisions, which also includes
events in the general economy (Johnson & Sherraden,
2007).
Financial Literacy


Knowledge is strongly linked to behavior in the area of
personal finance, as more knowledgeable individuals
generally display more responsible or effective
financial behaviors (Woodyard &Robb 2012).
The influence of classmates have significant effects on
retirement savings decisions. and educational training
effectively increases financial knowledge and improves
the retirement planning of pre-retirees Hershey, Walsh,
Brougham, Carter, and Farrell (1998).
Financial Literacy
According
to Hays (1999), “the most
effective form of communication is
retirement-education seminars that
bring to life what lies dormant on
paper” (p. 108).
Early Intervention
 Youth
should not be limited to only the financial
environments their families provide for them,
rather the ability to compare and contrast in their
personal experience with the ideal financial
circumstances will increase their cognitive logic
and develop their amplitude towards financial
literacy with cause and effect experiences
(Williams, Grizzell, & Burrell 2011).
Early Intervention
 “Financial
literacy training must begin in the
freshman year in order to help students anticipate
and overcome many of the economic pressures
they will face throughout college afterwards.”
According to Godfrey (2006).
 The cohort approach to financial literacy is
something to consider for future planners.
Projection Accuracy
 Under
traditional retirement planning, consumer’s
tend to oversave, underspend in their early years of
retirement or postpone retirement.
 “Reality” retirement planning assumes that’s a
household’s real spending will decrease in
increments through retirement.
 The reality retirement planning approach enables
the consumers to realize retirement seven years
earlier than the traditional approach.
Projection Accuracy
 Reality
retirement planning more accurately
portrays the spending habits of the average
American household.
 Incorporating these statistics into a client's
financial plans can give a more accurate retirement
projection. This advancement may hold the key to
helping consumers realize more accurate
projections on when they can retire and how much
they need to fund this event.
Projection Accuracy
More
accurate projections can enable
a consumer to determine the
appropriate steps required to achieve
specific goals in estate planning, tax
reduction planning, and investment
management.
Projection Accuracy
Estate Planning:
 Having
the ability to forecast future events
could allow planners to take advantage of
sophisticated gift and estate tax avoidance
strategies as well as numerous other estate
planning techniques.
Projection Accuracy
Tax planning:
 Knowing the approximate size and timing
of investment income could be useful
information when developing a consumer's
tax reduction strategy. The changes in
projected tax rates could alter the way a
consumer spends, saves, and distributes
money from retirement accounts.
Projection Accuracy
Investment management:
 Reality retirement planning has the
tendency to require larger inflation-adjusted
distributions early in retirement, with
incremental decreases throughout a
consumer's retirement years. This type of
foresight would most likely determine a
different asset allocation than what the
traditional approach would suggest.
Discussion
 Financial
literacy programs within the
school system.
 Cohort approach utilization
 Employer based participation
 Technology based education
 Accurate projections
 Incentives
THANK YOU!
Bibliography












1.Population Reference Bureau. (2000). 2000 United States population data sheet (Section 4).
Washington, D.C.: Author.
2.Price, C. A. (1998). Women and Retirement: The Unexplored Transition. New York: Garland Press.
3.Price, C. (October 2003). Women’s Retirement: Beyond Issues of Financial Security. Vol. 41, 5.
Retrieved from http://www.joe.org/joe/2003october/a6.php.
4.Woodyard, A. and Robb, C. (2012). Financial knowledge and the gender gap. Journal of Financial
Therapy, 3, (1).
5.Butrica, B.A., Iams, H.M. (2003). The impact of minority group status on the projected retirement
income of divorced women in the baby boom cohort . Journal of Women and Aging, 15, No. 2/3, 6788.
6.U.S. Bureau of the Census. (2000). Statistical abstract of the United States: 2000
(120th edition). Washington, DC: U.S. Bureau of the Census.
7.U.S. Bureau of the Census. (2001). Statistical abstract of the United States: 2001
(121st edition). Washington, DC: U.S. Bureau of the Census.
8.Grad, S. (2002). Income of the population 55 or older, 2000 (SSA Publication No.
13-11871). Washington, DC: U.S. Government Printing Office.
9.Wright, R. (2011). Paying for retirement: Sex differences in inclusion in employer-provided
retirement plans. The Gerontologist, 52, No. 2, 231-244.
Bibliography









10.
Lowery, Annie. (2010, June 18). Race and the Foreclosure Crisis. The Washington
Independent.
11.
Williams, D., Grizzell, B., Burrell, D.N. (2011). An applied case study analysis of potential
societal importance of financial literacy education for African-American and Latino American
adolescents. The International Journal of Interdisciplinary Social Sciences, 6, No. 3, 245-260.
12.
Avard, S., Manton, English, D., & Walker, J. (2005) The Financial knowledge of college
freshman. College Student Journal, 39, 321-399.
13.
Godfrey, N.S. (2006) Making our students smart about money. The Education Digest, 21-26.
14.
Kirkpatrick, D. (1998). Evaluating training programs: The four levels. New York: BerrettKoehler Publishers.
15.
Hendley, A. A., & Bilimoria, N.F. (1999). Minorities and social security: An analysis of
racial and ethnic differences in the current program. Social Security Bulletin, 62, (2).
16.
Choudhury, S. (2002). Racial and ethnic differences in wealth and asset choices. Social
Security Bulletin, 64(4).
17.
Knoll, M. (2011). Behavioral and psychological aspects of the retirement decision. Social
Security Bulletin, 71(4).
18.
Li, Xiaoyan, Michael Hurd, and David S. Loughran. 2008. The Characteristics of Social
Security Beneficiaries Who Claim Benefits at the Early Entitlement Age. AARP Public Policy
Institute Research Report No. 2008-19. Washington, DC: AARP.
Bibliography










19.
Christie, Amy M., and Julian Barling. (2009). "Disentangling the Indirect Links Between
Socioeconomic Status and Health: The Dynamic Roles of Work Stressors and Personal Control."
Journal of Applied Psychology 94(6): 1466–1478.
20.
Joo, S. and Grable, J.E. (2005). Employee education and the likelihood of having a
retirement savings program. Retrieved from www.afcpe.org/assets/pdf/vol1615.pdf
21.
Bajtelsmit, V.L., Bernasek, A., & Jianakoplos, N.A. (1999). Gender difference in defined
contribution pension decisions. Financial Services Review, 8, 1-10.
22.
Dinkins, J. M. (1994). Expenditures for baby-boomer householders: Racial and ethnic
differences. Family Economics Review, 7, 11-19.
23.
Spilerman, S. (2000). Wealth and stratification processes. Annual Review of Sociology, 497524.
24.
DeVaney, S. A., Gorham, L. Bechman, J. C., & Haldeman,V. (1995). Saving and investing
for retirement: The effect of a financial education program. Family Economics and Resource
Management Biennial, 1, 153-158.
25.
Hershey, D. A., Walsh, D. A., Brougham, R., Carter, S., & Farrell, A. (1998). Challenges of
training pre-retirees to make sound financial decisions. Educational Gerontology, 24, 447-470.
26.
Hays, S. (1999). Boost 401(k) participation with education. Workforce, 78, 107-108.
27.
Massena, L. (1999). Pension plans favor employee participation. Workforce, 78, 80-82.
28.
The Gerontological Society of America. (2012). Special Issue: Baby Boomers- Not your
mother’s old age: baby boomers at age 65. The Gerontologist Vol. 52, No. 2, 149–152.
Bibliography










29.
Frey, W. H. (2010). Baby Boomers and the new demographics of America’s seniors.
Generations, 34, 28–37.
30.
Hughes, M. E., & O’Rand, A. M. (2004). The lives and times of the Baby Boomers.
Washington, DC: Population Reference Bureau.
31.
Freedman, V. A., Martin, L. G., & Schoeni, R. F. (2002). Recent trends in disability and
functioning among older adults in the United States: A systematic review. The Journal of the
American Medical Association, 288, 3137–3146.
32.
Manton, K. G. (2008). Recent declines in chronic disability in the elderly U.S. population.
Annual Review of Public Health, 29, 91–113.
33.
Quinn, J. F. (2010). Work, retirement, and the encore career: Elders and the future of the
American workforce. Generations, 34, 45–55.
34.
U.S. Census Bureau. (2010). The next four decades: The older population in the United
States: 2010 to 2050, Current Population Reports. Washington, DC: U.S. Census Bureau, 25–1138.
35.
Collinson¸C. (2011). The Retirement Readiness of Three Unique Generations: Baby
Boomers, Generation X, and Millennials. Retrieved from http://
www.transamericacenter.org/.../tcrs2014_sr_three_unique_generations.p
36.
Bernicke, T. (2005). Reality retirement planning: A new paradigm for an old science. FPA
Journal June.1-8.
37.
Duflo, E., & Saez, E. (2002). Participation and investment decisions in a retirement
plan: the influence of colleagues’ choices. Journal of Public Economics, 85.121–148.