Although participation in the Thrift Savings Plan (TSP), which is equivalent to a 401(k) retirement plan and specifically designed for people who work for the federal government, is generally high, there are noted racial disparities in involvement and in account balances.

The American Association of Retired Persons (AARP) and the Ariel Education Initiative, a private foundation whose purpose is to strengthen American neighborhoods, held a retirement conference “African American and Hispanic Retirement Savings Behavior at the Workplace,” which discussed the disparities and offered opinions and solutions to closing the racial wealth gap.

The conference followed a study Ariel conducted with Hewitt Associates.

The report, “401(k) Plans in Living Color: A Study of 401(k) Savings Disparities Across Racial and Ethnic Groups,” which found that minorities are less likely to participate in TSP than Whites.

When minorities do participate, they contribute 25 percent less than Whites, which causes them to have lower account balances at retirement. In addition, studies showed that even when African Americans do save, they are more likely to have to withdraw money from that account because of hardship.

Gender is also a factor. More women participate in TSP, but overall, their salaries are lower, which in turn, causes them to have lower account balances.

The United States Office of Personnel Management (OPM) did a similar study which yielded the same results.

“The findings of OPM’s analysis are consistent with the Ariel/Hewitt study, which shows significant differences across race and ethnicity in the way individuals save and invest in their 401(k) plans. We believe the report serves as yet another call to action for employers and the government to find ways to ensure every American has the tools and resources needed to prepare for retirement. We applaud OPM for taking this critical first step, and we hope it will encourage other organizations to review their own 401(k) data using this lens,” said Alison Borland, retirement outsourcing leader for Hewitt Associates.

If higher participation and higher contribution in TSP and 401(k) doesn’t happen in the minority community, there is a strong likelihood that when they retire, they will end up in poverty.

“Retirement security is a vital issue for all Americans, no matter their race or gender. Expanding pension coverage through products like the auto-IRA, auto-enrollment for 401(k) plans, and adequate fee disclosure have the potential to close some of these gaps so every American can have a secure retirement plan after a lifetime of work. We are actively exploring ways to make sure they can be implemented effectively and broadly,” said Senator Herb Kohl, chairman of the Senate Aging Committee.