hero retirement risk study smart steps to address retirement Risks for people of color

Smart Steps to Address Retirement Risks for People of Color

Could a potential misinterpretation of their financial situation put POC’s retirement readiness at risk?

Everyone’s journey toward retirement looks different, and for Americans who identify as people of color (POC), they may face unique challenges as they head toward their golden years.

Although they suggest feeling reasonably prepared for retirement, POC report limited retirement-focused investments and lack of progress toward achieving important retirement goals. These findings from our Retirement Risk Readiness Study* indicate a potential misinterpretation of their financial situation, which could be attributed to different cultural values that shape their decision making, that may put POC’s retirement readiness at risk.

Unfortunately, that risk may be compounded due to a lack of professional help. Less than one-third (32%) of POC indicated that they are currently working with a financial professional.

Knowing this, how can POC make progress toward achieving a more confident financial future? Here are three steps that can help POC address their financial situation head on and develop an achievable retirement plan:


Connect with a financial professional

Developing an effective retirement savings plan can be extremely challenging, even without professional help. With so many factors to consider – risk mitigation, tax efficiency, portfolio allocation – feeling completely prepared for retirement is a tall order for many. Considering the fact that less than half of POC report ownership of investments and accounts that can help with retirement security, POC are potentially at greater risk. A good way to help address these retirement risks is to meet with a financial professional so you can get a second opinion on your strategy and help ensure you have all of the bases covered as early as possible.


Consider removing some risk from your portfolio

While a certain amount of risk in a retirement portfolio is necessary to allow for your savings to grow, you may want to consider removing some of that risk if you’re at all concerned about an unexpected retirement, or if you may want to retire earlier than you initially planned. This doesn’t mean taking risk completely off the table, but rebalancing to make sure you’re not over-invested in financial vehicles that are susceptible to market volatility could help bring more reassurance. At the same time, families of color have cultural norms that impact how wealth will be protected, distributed, where it has accumulated, and therefore how it will be taxed. Most people want to live a similar lifestyle to the one they had before retirement and understanding your retirement timeline in conjunction with your risk exposure is important in planning for life in retirement.


Address guaranteed income

Living longer than ever before, many Americans from all backgrounds will need more than the traditional 401(k) and Social Security income streams. Yet only a quarter of POC indicated they have purchased a financial product, such as an annuity that provides a guaranteed source of retirement income. Addressing retirement income early in the planning process can be a smart way to help prepare for potential surprises in your retirement strategy. Having a strategy that covers basic expenses can help build confidence to address risks that come your way, no matter when you have to put your plan into action.

Creating a sound retirement strategy requires careful planning and consideration, all while taking into account your unique financial and cultural situation. Finding a trusted financial advisor who understands some of the challenges and unique considerations POC face as they develop a financial strategy can help address some of these risks early on to help keep your retirement on track.

*Allianz Life conducted an online survey, the 2020 Retirement Risk Readiness Study, in January 2020 with a nationally representative sample of 1,000 individuals age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k.

The study was balanced and weighted on various demographic factors, including age, income, and race. The study is comprised of 84% of respondents who identified as white and 17% who identified as People of Color (8% Black; 6% Asian; 1% Native American/Alaskan; 2% other).

Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.

Products are issued by Allianz Life Insurance Company of North America. Variable annuities are distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297.