Racial/ethnic differences in holding a retirement saving motive: A decomposition analysis

Establishing a retirement goal facilitates one's long-term financial planning behavior. Yet, the portion of U.S. households who achieve this goal is relatively small. Further, the percentage is much lower among racial and ethnic minorities. This study investigates racial/ethnic disparities in motives for holding a retirement savings and contributing factors to explain the gaps. Results from the 2016 Survey of Consumer Finances (SCF) indicate that White respondents were more likely to hold a retirement saving motive than were other racial/ethnic groups, even after controlling for various socio-economic characteristics. Decomposition analysis shows that homeownership, objective financial knowledge, planning horizon, and age were the most important determinants that explain the racial/ethnic gap in withholding a retirement saving motive. This study provides evidence in support of the importance of tailored educational interventions among racial/ethnic groups.