Hispanic Retirees: Low Saving, Long Life

Just one in three native-born and immigrant Hispanics working in this country has a retirement plan through their employers. If they do have one, three out of four save money in their plans, which is somewhat less than their coworkers.

One reason for the first abysmal statistic is that many Hispanics and Latinos, recent immigrants in particular, hold down part-time restaurant or hotel jobs at very low wages. But even among Hispanics working full-time, access to an employer savings plan is still much lower (44 percent) than it is for their white and black counterparts (more than 60 percent).

Low rates of saving are compounded by the fact that elderly Hispanics and Latinos will need more money over their longer-than-average retirements.  A 65-year-old Hispanic man can expect to live 16 months longer than a white, non-Hispanic man in this country, and Hispanic women live 11 months longer. [One theory is that less healthy immigrants are more likely to return to their home countries, so the U.S. immigrant population that remains is healthier.]

“Longevity is a big issue, but there is little awareness of this” in the Hispanic population, said retirement consultant Manuel Carvallo, a Chilean immigrant to the United States.

The first priority for these workers is more basic, he said: securing employment at a company that offers a plan and contributes on workers’ behalf.  Carvallo’s clients include U.S. hotel operators setting up retirement plans for their largely Hispanic workforces, but he said many small hotels are simply not interested.

He’s seen some cause for optimism recently in his survey of the large Mexican population working in the United States. The survey showed a small increase between 2013 and 2016 in the share of workers at companies offering retirement plans.

But on top of the labor market barriers to saving are the cultural barrier of an unfamiliar U.S. financial system and an understandable distrust of financial companies due to the corruption in some South and Central American countries.

MassMutual makes special efforts to enroll employees for the company’s 401(k) clients in states like Texas with large Hispanic or Latino representation on their payrolls. One problem confronted by Sean Jordan, MassMutual vice president, is that employer retirement plans are not common in South and Central America.

In the United States, federal deposit insurance and national banking regulations have made Americans comfortable with depositing their money in a bank or mutual fund company. But Hispanic and Latino workers suspicious of banks will often deal in cash, and they would rather “put money in a coffee can,” Jordan said.

MassMutual encourages saving by hiring people who speak Spanish to make presentations when a client’s workers are recent immigrants.  “The challenge isn’t just, how do we get the message to people. The other half is saying how do we engage and ask people what they’re worried about so we can help them make informed decisions,” he said. “We’re asking them to do something” – save – “that’s in their interest.”

Carvallo said he sees other, bigger cultural obstacles than distrust.  Low-paid workers with little education often aren’t aware of how the U.S. retirement system works.  And parents’ desire to put their children first – above their own retirement – runs deep in Latin cultures, including Mexico and many Central and South American countries, he said. A related issue that concerns him is unauthorized workers contributing to Social Security who won’t meet the eligibility tests required to receive benefits.

But he continues to plug away at his mission of encouraging Hispanics and Latinos to save. Sometimes, he said, employers unwilling to set up their own payroll deductions for 401(k)s allow him to talk to their workers about a personal IRA.  And often he finds workers who recognize the need to save, even if they can put away only $50 or $70 a month.

“Despite their low income,” he said, “many say, ‘I have to do something about it.’ Once you explain, people actually contribute.”

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