T he P ortland O bserver • A ugust 2, 1995
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Retirement Nest Eggs Don’t Exist For Many
Blacks and
and Hispanics
Hispanics have
have a a
harder time than whites saving for
retirement and federal policies aren ’t
helping, the findings o f a new study
indicate
“Race and ethnic disparities are
huge, said the study, whose results
were released last week. “The typical
older black and Hispanic household
has less than $20,000 in wealth. More
than a fourth ofthe older black house­
holds and a third of Hispanics have
no assets at all.”
That’s because some black and
Hispanic families have so little mon­
ey they can' t afford to save for retire­
ment, said a study by Rand, a non­
profit think tank.
“Differences in financial wealth
are especially dramatic,” the study
said.
For example, among white
households in the pre-retirement
years of 5 1 -61, the top 5 percent have
saved $300,000, the typical family
has $17,300 and the bottom fifth has
$800 or less.
re^rrh»™ said
..
. .
less, Rand researchers
provides only “a minimum decent
However, the typical black or
standard of living” in old age. Smith
Hispanic household has less than
said.
$500 in liquid assets, with four out of
“It should no longer be viewed
10 having nothing, the study said.
as the prime source of retirement
“The fact that they have less
income replacement across all in­
money certainly means that they will
come levels," he said.
save less money, but they (also) save
Advocates for the elderly said
less as a fraction of their income,"
Smith ignores the fact that Social
said James P. Smith, a Rand senior
Security is a lifeline for many people.
economist, who conducted the study.
“The problem is not to under­
Counterproductive public poli­
mine Social Security; the solution is
cies, especially related to public as­
to encourage people to save,” Evelyn
sistance. add to the problem, he said.
Morton, a lobbyist for the American
For example, Social Security
Association of Retired Persons.
benefits actually weaken the urgency
More than 60 percent of Social
to save for retirement. Smith said.
Security beneficiaries still rely on
“In promising to replace a high
Social Security for 50 percent of
proportion ofthe income received by
their income, she said. One in four
the poor during their working years,
beneficiaries rely on it for at least 90
it discourages efforts to save for re­
percent of their income.
tirement, he said. “One reason that
Sm ith said members of poor fam­
the poor don’t save is that we give
ilies are also more likely to divorce
them every reason not to.”
and less likely to remarry quickly,
The government should reform
depriving themselves of a two-in­
the Social Security system so that it
come household
House Purchasing Power Declines
Despite declines in mortgage
rates, home buyers lost a marginal
amount o f purchasing power in the
second quarter of 1995, due primari­
ly to home price increases, according
to the National Association of Real­
tors.
N A R ’s com posite Housing
Affordability Index, which measures
affordability factors for all home
buyers, was 124.8 in the second quar­
ter of 1995, compared to 125.5 in the
previous quarter and 127.2 in the
second quarter of 1994.
According to NAR’s President
Edmund G. Woods, Jr., the home
price increases that occurred during
the second quarter offset declines in
mortgage rates, resulting in a slight
loss in purchasing power. However,
he noted that housing affordability
conditions remain extremely favor­
able.
“Overall, home buying condi­
tions are excellent. In many cases,
consumers are surprised at how much
they can afford,” Woods said.
When the index measures 100, a
family earning the median income
has exactly the amount needed to
purchase a median-priced resale
home, using conventional financing
and a 20 percent down payment.
Using the second-quarter housing
affordability measurement, half the
families in the nation had at least
124.8 percent — easily more than
enough — of the income needed to
qualify for the purchase of a home at
the national median second-quarter
price of $ 1 11,000. In fact, based on
the second quarter statistics, the typ­
ical family could qualify for a home
costing $138,300.
NAR Chief Economist John A.
Tuccillonoted that, nationally, hous­
ing affordability conditions are ex­
pected to improve later this year, as
interest rates keep edging downward.
However, he pointed out that first­
time buyers are continuing to face
affordability problems that are not
solved solely by favorable financing.
NAR’s first-time home buyer index,
which shows the ability of renters
who are prime candidates to qualify
for a mortgage on a starter home, also
fell in the second quarter o f 1995
compared to the previous quarter.
The first-time buyer index was 80.9
in the second quarter, down from
81.5 in the first quarter of 1995, and
down from 82.4 one year ago.
According to this measurement,
the typical first-time buyer had only
80.9 percent — less than enough
C E L E B R A T IO N o f
|e ^ J o r t l a n ò ( © b s e r u e r
ofthe income needed to purchase the
typical starter home, priced at
$94,400 the second quarter. NAR's
first- time buyer index showed that
the qualifying income needed for
conventional financing covering 90
percent of the starter home price was
$30,580.
Yet the median income of prime
first-time buyers was $24,735 - - a
difference of $5,845. As a result, a
typical first-time buyer could only
afford a home costing $76,400, which
is $ 18,000 below the typical starter-
home price. The first-time buyer
median income represents the typi­
cal income of a renter family with
wage earners between the ages o f 25
and 44.
“Lower mortgage rates don’t
eliminate all the obstacles to home-
ownership,” T uccillo said. “Purchas­
ing still remains difficult for many
entry-level buyers, because they must
struggle to come up with down pay­
ment funds.
Outside of income differences,
the major difference between the
purchasing power o f first-time buy
ers and that of repeat buyers is that
repeat buyers have equ ity, which they
can put into future purchases. First­
time buyers don’t.”
Marriage also encourages sav­
toward (housing) in some cases," he
ing, he said. “ I he implication is that
said.
the decline in the institution of mar­
And some consumers literally
riage has contributed to the secular
stuff money in their mattresses be­
fall in the nation's aggregate savings
cause they don't trust banks, Moreno
rate," Smith said.
said.
And poor health among some of
Also, poor people in general
the poor also makes it hard for them
haven’t been taught the importance
to save, he said.
of saving, he said.
"Households in excellent health
"A lot of that goes back to it’s
have more than four times the wealth
such a difficult daily struggle,”
of those in poor health,” the Rand
Moreno said.
study said. “Median wealth in house­
But the bad news isn’t reserved
holds w here both spouses are in poor
just for blacks and Hispanics, Smith
health is about $25,000, compared to
said.
a median worth o f over $200,000
"With the pension system in
when both enjoy excellent health.”
steep decline and Social Security’s
Some Hispanic families have a
promises impossible to keep as the
tough time saving because they're
population ages, two legs o fth e re­
paying so much for rent, said Gilbert
tirement tier are guaranteed to fail,”
Moreno, executive director of the
he said. “Loud alarm bells are ring­
Association for the Advancement of
ing for the future.”
Mexican-Americans in Houston.
Most middle-aged and elderly
“We’re seeing (some) Hispanic
households have “very modest hold­
families are paying 50 percent or
ings at best, with large segments of
greater of their disposable income
the over-50 population having no net
. .... are interested
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worth at all. Smith said
One reason is that many con­
sumers in the 50-plus group are
caught in a “ sandw ich" g en era­
tion. having to care for their own
elderly parents while supporting
adult children who have moved
back home, said M erriott Terry,
vice president o f education at
Consumer Credit Counseling Ser­
vice o f the G u lf C oast Area,
which helps consum ers with fi­
nancial problems.
“ Iheir children are jeopardiz­
ing their parents’ retirement,” she
said. “ I hey don’t have the resources
or the savings to come up with any
extra for retirement.”
Smith said in order to encourage
more saving, the government should
mandate that everyone allocate a
portion of their earnings for retire­
ment and substitute a consumption
tax for the income tax so that returns
from savings and investments aren’t
taxed
How To Buy A Host Home
termine your
vour price
orice ranee:
I. Determine
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The best first step is to find out what
you can atlord by getting pre-quali-
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non profit organization, which pro­
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2. Tell HOST what you are
looking for: Let us know your price
range, the number of bedrooms you
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