ING recently published a new study on retirement readiness in different racial communities. Asian Americans had mixed results in the study. There are some positive results. Asian Americans overall had saved the most for retirement, $81,000 in an employee sponsored retirement plan (versus $69,000 for the population in general). Not surprising, Asian Americans are more likely to contribute to a employee sponsored retirement plan, with 81% saying they contribute (compared to 75% of the overall population).
But Asian Americans don’t excel everywhere when it comes to planning their retirement. See where Asian Americans fall short in retirement planning and where else we excel after the jump.
Given the higher amount in retirement savings by Asian Americans, it should be no surprise that Asian Americans also contribute more to retirement accounts, 10.3% of a paycheck on average (versus 8.4% in the general population), and $324 on average per paycheck (versus $220 in the general population). Even with the higher contribution to retirement savings, Asian Americans also save more in general with 69% having savings outside of retirement plans (compared with 58% of the general population).
When it comes to routine savings and expenses, its generally considered a good idea to have an emergency cash reserve (90% of Asian Americans say they have one, versus 81% of the general population), and even better if that reserve can cover 6 months of living expenses (51% of Asian Americans have 6 months of reserve versus 32% of the overall population).
When it comes to debt, Asian Americans seem to manage it better than other groups. Only 15% of Asian Americans have student loan debt (compared to 25% overall), 23% of Asian Americans have a car loan (compared to 44% overall). Asian Americans use credit cards more (96% versus 91%), but have better control of them with 35% carrying debt on credit cards, versus 40% overall, and more likely to pay off credit cards in full every month (75% versus 50% overall).
So if Asian Americans are so great at their finances, is there anywhere they need help? The answer unfortunately is yes. Asian Americans are the least likely to have actually done any estate planning by writing a will and testament (26% versus 35%). This may be cultural, as it’s taboo to discuss death in many Asian cultures, with some believing discussion or activity around one’s death is inviting death into your home. Asian Americans are also the least likely to have actually calculated how much money they will need to continue their lifestyle after retirement (39% vs. 43%). Asian Americans are also least likely to work with a financial professional (22% vs. 28%).
The last place where Asians differ from the norm is concern for saving for short-term expenses (versus the long-term retirement savings). Asians are more concerned about saving for vacation (21% vs. 14%), and saving for a down payment for a home (12% vs. 8%).
My own parents were great examples of the results of this study. While they were successful in accumulating savings for their retirement, they didn’t think about it much, nor did they ever wonder if they’d have enough. They always figured they’d have their kids to depend on if they didn’t have enough. In addition, they really didn’t do any estate planning, as they were highly superstitious that it would bring bad luck, that is until it was pretty obvious they weren’t going to be around due to their terminal cancer diagnoses.
On the other hand I’ve probably well exceeded Asian Americans in retirement planning. I work with a financial planner, I’ve probably got way more life insurance than I need, and I’ve been contributing to a retirement plan since I was 22. Part of this drive, especially around life insurance and estate planning didn’t happen until my daughter was born. She was really the driving factor in setting up a living trust. So if you haven’t thought about life insurance or a will, and you have kids, you should get out and do some estate planning, not for yourself, but for your kids.
