Advise Financial

How are your retirement savings going at your age?
¿Por qué los latinos migrantes retrasan su retiro por la inflación?
10 de June de 2022
Social Security: How does inflation affect benefits?
Seguro Social ¿Cómo afecta la inflación sus beneficios ?
8 de July de 2022
How are your retirement savings going at your age?
¿Por qué los latinos migrantes retrasan su retiro por la inflación?
10 de June de 2022
Social Security: How does inflation affect benefits?
Seguro Social ¿Cómo afecta la inflación sus beneficios ?
8 de July de 2022

Why are Latino migrants delaying their retirement due to inflation?

Years ago it was said that the possibilities of a Financially Independent Retirement in Latino families were in a state of emergency.

Credits: Magisto

Now, this situation, far from improving with the pandemic, has actually worsened even more, for the following reasons:

• Latino or Hispanic businesses in the United States were one of the most affected groups since they work in the entertainment industry in general, this being one of the sectors that has had the hardest time recovering.

• It was one of the ethnic groups with the fewest savings and many had to use them and take on credit card debt, currently paying one of the highest interest rates in history.

To make this situation even more complex, the United States is experiencing the highest inflation of the last 40 years.

Credits: Magisto

And of course the main factors that make price indicators rise are:

• Housing expenses

• Gasoline

• Food and electricity.

A report by Bank Of America shows that families of color and Latinos spend a large part of their income on these items.

So, many might say that the only solution is to prepare your family to help you financially in retirement.

This creates a circle of financial destruction, since your children cannot save because they have to help you and when they reach retirement the circle is repeated again.

But of course there is a solution and we are going to give you some suggestions to get out of this situation and give your children the best gift a father can give them: not being a financial burden on them.

Credits: Magisto

1. You have to save to invest.

Expenses go up and money is not enough to cover them, the only way to get out of this situation is to look for new sources of income, this being what you can control since inflation is an external factor to you.

Now, as soon as you start to generate more income, you must separate at least the equivalent of one month of your monthly expense and leave it in a bank account.

As soon as you have this small financial cushion, you must apply all your effort to pay credit card debts.

Remembering that the Federal Reserve (Central Bank of the USA) has said that interest rates will continue to rise and the amount you pay for interest on the card will also rise.

After reaching this goal, continue to grow your emergency fund until you have a protection in case a recession comes in the future and you lose your job.

We know that the money in the bank account loses its purchasing power on a daily basis. For this reason, when you already have the emergency fund you need, you must go to a second level, which is: start investing the new savings that you generate.

Many people ask themselves: What should I invest in? and although this answer has many nuances, it should always be consulted with a financial specialist.

Credits: Magisto

History shows us that over time stocks are one of the investment instruments that have managed to beat inflation.

Remember in the same way that these are not times to take high risks, so diversification will always be an ally.

For this, index funds or so-called Exchange Traded Funds (ETFs) give you high diversification with low costs.

Always keep in mind that the money you invest in the stock market or Wall Street is for the medium or long term, not for the short term.

In investments there is nothing more powerful to make your money grow over time than the combination of performance and time, to the extent that your investment can grow more without having to touch it.

Let us remember the phrase of Charlie Munger, American billionaire and partner of Warren Buffett, says: “The first rule of capitalization is never to interrupt it unnecessarily”.

Time shows us that the most successful investors are those who, when the markets go down, don’t panic and take their money out because the markets fell.

Rather, they apply the methodology of the trader, let me invest or buy more because it is cheaper than yesterday and then they let it grow over time.

Because for them it is that: they have an emergency fund and they know that this money was not for the short term.

The moments of decline in the markets should be seen rather as opportunities to enhance your investments.

Credits: Magisto

Now, instead of worrying about the declines in the markets, what you should take into account is that one of the main reasons why people have to retire from their jobs before, for which a recent study carried out by the Employee Benefit Research Institute’s shows us that:

For every 10 people, 3 must retire early due to health or disability problems. If we add to this figure the number of people who have to retire because the company where they work made a reduction in personnel, we would then reach more than 50%.

Therefore, you should lean on the growth that work from home opportunities have had.

Which in many cases will allow you to continue working despite having a disability and expand your field of expertise to other areas that are capable of leaving the work you have done all your life but allow you to continue generating in order to delay in time. the moment when you are going to have to start withdrawing money from your investment portfolio.

Well, if you are going to have to work for more years

3.- Delay your retirement date before Social Security

This is one of the main mistakes made by Latinos in the United States; after contributing for more than 10 years, you earn the right to receive the benefit of a monthly payment in your retirement.

But they also tell us that you could start receiving these benefits when you turn 62 or wait until your full retirement age, which according to Social Security is approximately 67, and many people say:

I rather apply for this benefit as soon as possible because they need it to cover their expenses.

Credits: Magisto

According to the same study by the Employee Benefit Research Institute’s, 94% of retirees indicate that their main source of income comes from Social Security, so as long as you can optimize it, your retirement will be much more favored.

And one of the ways to optimize it is not to start at age 62 but also to give it time and try to start later at age 67, in this way the monthly amount you will receive could be almost 25% more than what you would get if you start the 62 years.

The great conclusion is that of course they are not easy measures but if you start from now we are sure that you will be able to achieve it and if you feel that you need help we know that many people turn to their family or friends to ask for advice on these issues but as they say over there cobbler to your shoe and that’s where a Certified Financial Planner (CFP®) can support you.

Alonso Rodríguez Segarra
Alonso Rodríguez Segarra
Founder & CEO Advise Financial advise-financial.com Alonso Rodriguez Segarra is a “CERTIFIED FINANCIAL PLANNER™” named by Investopedia among the Top 100 Financial Advisors in the USA  with more than 20 years of experience. His specialty is helping those people who want to plan for their retirement or optimize their retirement, with Hourly Financial Planning always looking for the best for his clients, under fiduciary criteria.

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