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Members of those two groups are less likely than white and Asian workers to participate in their employers' 401(k) plans, and when they do contribute, they save less, according to a study scheduled for release today by Ariel Education Initiative and Hewitt Associates.

African Americans and Hispanics also are much more likely to take money out of their 401(k) plans for emergencies, which could further stunt long-term savings growth. And they are less likely to invest in stocks in favor of low-risk investments and real estate, increasing the risk that their savings won't keep pace with inflation, retirement specialists say.

The survey, which analyzed data from nearly 3 million employees at the end of 2007, found significant differences in retirement savings even among higher-income employees. White workers who made $120,000 or more had an average balance of $223,408 in their 401(k) plans, vs. $154,902 for African Americans in the same salary range.

Monica Flamand, 33, a fraud analyst in Chicago who is Hispanic, has a 401(k) plan through her job but has saved only about $6,000 in five years. Her husband doesn't have a 401(k) plan, she says. She worries that Social Security won't be there for her when she retires.

"We don't save," she says. "We should. We could, if we really wanted to, save at least 3% of our paycheck, which is probably what we should talk about doing."

Last year's bear market wiped out 27% of the typical worker's 401(k) plan, according to Fidelity Investments, forcing millions of Americans to save more, delay retirement or both. Many Americans have increased their savings rate in recent months, even as many employers have reduced or eliminated matches to 401(k) plans. But the Ariel/Hewitt study indicates that African Americans and Hispanics will have to save at a significantly faster pace than others to have a chance at a comfortable retirement .

The survey's authors say the savings gap among races can be closed by automatically enrolling workers in 401(k) plans, improving financial literacy and giving workers more time to repay 401(k)-plan loans. Why African Americans and Hispanics are falling behind, according to Ariel/Hewitt:

Inexperience

Angelique Anguiano, 27, of Oak Park, Ill., an account manager for telecommunications services firm Cimco Communications, is putting 5% of her salary into her 401(k) and has saved about $10,000.

Anguiano, of Mexican and Puerto Rican descent, says that her first-generation family didn't talk much about 401(k)s or other retirement instruments. She says the same is true for friends who come from similar backgrounds.

"Our parents didn't necessarily grow up with a strong financial education," she says. "They tend to think of savings as a savings account."

In turn, she has had to learn about financial products and saving for retirement through her college classes and her work experience.

"In the U.S., there is a 401(k) culture where most people simply know that it is something you have," Mike Periu, principal of EcoFin Media, which develops financial literacy content in Spanish and English, said in an e-mail. "This is not the case for many Hispanics. The benefits of a 401(k), or even how to participate, is something new that must be taught."

Hairdresser Janice Davis, 40, an African American who lives in Chicago, says she was brought up in the rural South by grandparents who didn't understand how financial instruments worked. "They expected to retire and draw Social Security. That's what it was back then," she says.

Davis got her financial education the hard way. When she decided to launch a 4,000-square-foot, full-service spa in the Chicago area, she cashed out the majority of her 401(k). Business was going well, she says, but she found it difficult to turn a profit. She sold it last year and is out the money that she withdrew from her retirement account.

"Now, I'm in the process of trying to rebuild" that, she says. "I realized that if I don't save for the future, no one else is going to do it for me."

Derrick Johnson, 41, vice president of Zeller Realty Group in Chicago, is an example of how education at home can pay off.

Johnson says his father taught him at an early age that he should save for retirement before spending money on anything else. He started putting the maximum allowed into his 401(k) plan in his early 20s and now has a balance of more than $100,000.

Competing obligations

African Americans and Hispanics typically have less wealth than whites, says Alicia Munnell, director of the Center for Retirement Research at Boston College. When they're in a "race to meet the monthly bills," she says, saving is a lower priority.

African Americans and Hispanics also are less likely to inherit money than whites, Munnell says, which leaves less of a financial cushion against hard times. As a result, she says, these groups have a tougher time putting money in a retirement account and also tend to be more cautious about investing in the unpredictable stock market.

Minorities also may be held back by family obligations, says Monique Morrissey, economist at the Economic Policy Institute. If a worker comes from a demographic group that has been disadvantaged over generations, she says, the individual is more likely to be responsible for family members.

Lack of trust

Deena MacAllister, 38, an African American who lives in Tallahassee, says she and her husband, a pastor, have saved more than $60,000 in a retirement plan offered by his church. She's comfortable with the amount they've saved but acknowledges that most of the money is in low-risk annuities that protect their investment but offer a limited return.

"To be honest, we have not been very aggressive in terms of doing it through stocks," she says. They are planning to meet with a financial planner.

African-American workers are less likely than other workers to invest in stocks, which could limit the long-term growth of their savings, according to the Ariel/Hewitt study.

Overall, African-American workers invest 66% of their 401(k)s in stocks, vs. 70% for Hispanics and 72% for whites. African-American employees ages 30 to 49 — considered the prime ages for investing in stocks — were the most conservative.

Mellody Hobson, president of Ariel Investments, a Chicago-based mutual fund company, has studied African-American attitudes toward investing for years and says her research suggests that many equate investing in the stock market with gambling.

Years like last year, she adds, "reinforced this point of view, when you see these wild rides and massive volatility."

"When we do invest, we prefer real estate, outside of an employer-sponsored retirement plan," says Hobson, who is black. "And when we do save, we favor more conservative investments."

Older Hispanics also are less likely to trust financial markets, says Jay Rossi, principal of multicultural marketing firm DDR Global. "They hold onto money and invest in tangible things that one can touch, see and manage, such as real estate and cars. The whole idea of putting money into the hands of professional money managers is relatively new."

In this economy, people who invest in conservative investments, such as money market funds, are "going to feel pretty good," says Marina Edwards, senior retirement consultant at Towers Perrin, a consulting firm. But over time, the stock market's average rate of return has been about 8%, vs. 1% to 3% for a money market fund, she says.

Higher withdrawal rates

African Americans are more than twice as likely as whites or Asians to take a hardship withdrawal from their 401(k) plans. The withdrawal rate also was higher for Hispanics, although not as high as African Americans'. Asians had the lowest rate.

"That was maybe the most troubling and surprising thing in this study," says Barbara Hogg, a principal at Hewitt, a human resources and retirement plan consultant. Taking withdrawals from plans that already are smaller than average "has a huge impact" on retirement security, she says.

An employee who takes a $10,000 hardship withdrawal from his retirement account could have to pay out more than one-third of the money in taxes and early-withdrawal penalties, Edwards says.

In addition, she says, the withdrawal permanently would reduce the amount of money available to grow and compound. Assuming an average annual return of 8%, a 45-year-old employee who takes a $10,000 hardship withdrawal would reduce his account balance at age 65 by nearly $47,000, according to an analysis by Towers Perrin. A 35-year-old worker who takes a $10,000 hardship withdrawal would reduce her account balance at 65 by more than $100,000.

African Americans and Hispanics also are more likely to borrow money from their 401(k) plans than white and Asian workers, the study states.

Borrowing from a 401(k) plan won't hurt the employees' retirement savings if the worker repays the money, Hobson says.

But at a time when unemployment is rising, 401(k) loans have a significant downside. At most companies, employees are required to repay their loans when they leave the company, usually within 60 days. Otherwise, the loan becomes a withdrawal, triggering taxes and penalties. For most laid-off employees, repaying a 401(k) loan within that time period is virtually impossible, the study says.

Possible solutions

Various expert proposals for improving savings rates among minority groups include:

•Better information on minority participation. Encouraging companies to voluntarily collect and report 401(k) data on the race and ethnicity of participants could help employers look for ways to address the problem, Hobson says.

In 2004, McDonald's analyzed participation in its 401(k) plan and found that only half of African-American store managers contributed to the plan, says Rich Floersch, global chief human resources officer. This discovery led the company to start a program that gave store managers a one-time 1% raise and automatically contributed the money to the 401(k) plan, along with an increased company match. At the end of May 2009, 92% of African-American managers were in the plan. For whites and Hispanics, the participation rate was 94%.

•More flexible rules for 401(k) loans. Giving laid-off employees more time to repay their 401(k) loans would help African Americans and Hispanics retain their retirement savings, the study says. About 18% of companies currently offer loan-repayment options for employees who have lost their jobs, according to Towers Perrin.

But some financially strapped employers may be reluctant to implement more flexible repayment options because of administrative costs, says David Wray, president of the Profit Sharing/401k Council of America. "These companies are not set up to handle individual transactions. They're not banks," he says. "If I'm a company, and I'm laying people off, who am I going to have around to process checks?"

•More automatic enrollment. On average, companies that automatically enroll employees in 401(k) plans have an 82% participation rate, nearly 20% higher than those that don't have automatic enrollment, according to a 2008 study by Hewitt.

Most workers "tend to stick where you put them initially," which is why auto-enrollment is so effective, says Jack VanDerhei, research director at the Employee Benefit Research Institute.

In addition, automatically enrolling workers in target-date funds — which allocate contributions among stocks and bonds based on the worker's age — would encourage more young minorities to invest in stocks, Munnell says.

•More financial literacy programs. Hobson says making financial literacy part of the curriculum at public and private schools would go a long way toward closing the savings gaps among racial and ethnic groups.

"It's easier to take a class in wood shop or auto repair in this country than it is to take a class on financial literacy," she says. "The world has changed, and the education system needs to change with it."