The Hispanic Retirement Crisis Is IRA the Solution?

 As we get older, retirement or retirement issues go from being something distant to something worrying and much more when you read in Bloomberg that the Retirement Crisis in the United States already exceeds 7 billion dollars and factors as the pandemic and high inflation have only made this situation worse.

But one wonders if the common American is experiencing this retirement crisis where half of the families who retire are going to have to substantially lower their quality of life when they stop working, then how are we Hispanics left and more so those who were not born in USA.

For this I want to share with you a study called “Latinos Retirement Insecurity in the United States – written by Jennifer Brown and Diane Oakley” which is really excellent and you can find it on the page of Unidos US.

The Retirement Crisis in Hispanics:

According to an article by the Pew Research Center, the Hispanic population of the United States for the year 2020 was more than 62.1 million people, in 10 years the population grew by 50% and a study by the U.S. The Census Bureau estimates that by 2060, for every 3 Americans, 1 will be of Latino origin if this trend continues, making us the largest minority group in the American labor market.

Now, when analyzing how well we are prepared for retirement, almost 70% of Hispanics do not have any type of retirement savings, which compares with the so-called “white American” where this number drops by almost half.

Upon further investigation we see that not only many Hispanics have not saved but rather when we analyze how much they have saved, it can be seen that the balances are really low, if we compare them with white Americans, the balance is barely a third of what they have Or seen in another way, their balance is 66% higher.

Which tells us that more than 60% of Latino families when they retire are going to have a big problem to be able to support themselves and particularly the situation becomes even more complex for women over 65 years old where many of them will not be able to even cover their basic expenses.

Why are Hispanics more at risk from the retirement crisis?

Most people who emigrate place great value on saving and in this same study, when asked if they would like to participate in retirement plans to save for their retirement, a high percentage said that if they wanted to, then what would they do? happens to us?

There are really many causes, but let’s see two of the most important:

1.-) The parents or the family do not have enough knowledge regarding personal finances:

So many of their children have not seen at home the importance of saving over time, how investments in the capital market work and when they are told about the stock market they see it as a kind of Casino and not as a way to own a small piece of the great companies of the United States and the world and benefit from the value creation of these companies.

Some of them do not even know what an IRA (Individual Retirement Account) or a 401K account is where they can save for their retirement obtaining tax benefits over time, while for every 2 White Americans 1 has a retirement account in the case of Hispanics only 70% do not have it.

2.-) The types of jobs they have do not offer them this type of plan

The Latino workforce has historically participated in jobs with few benefits where these types of retirement plans are not offered or in very small companies that do not have these tools either. Likewise, they have temporary or part-time jobs where this same situation is repeated.

Various studies show that voluntary or employer-sponsored retirement plans are the most important instrument for obtaining a source of income in retirement after Social Security retirement benefits.

3.-) Many think that Social Security will be the solution to the crisis

Since its inception, Social Security benefits have always been a complement to retirement, but it was never said that with the amount you are going to receive you will maintain your quality of life. Added to this situation is the fact that many Latino immigrants have not contributed for 35 years since they may not have that number of years in the country, which means that the amount to be received will be less.

This situation is added to all the news that we see where it is indicated that part of the reserves that are used to pay the benefits to retirees of Social Security, could be exhausted in 2035, which could cause the amount of the checks that are being received drop to 80% if adequate measures are not taken.

So is there a solution to this retirement crisis?

There are various proposals, but so far none of them is working on the problem. Some analysts indicate that the political cost is very high since taxes would have to be raised in order to make a decision, and they are very unpleasant measures that few would like to take.

But in particular, there is an initiative that is being developed in some states where it is proposed to open a large IRA account (Individual Retirement Account) where all workers who work in said state and who do not have an employer retirement plan will automatically be enrolled in this retirement plan, which sounds great, but is being implemented very slowly.

So, as they say, it is better to take care of yourself and start saving in an Individual Retirement account such as IRAs, so that you can make your own withdrawal and not depend on third parties in your old age.

Sources: Latinos´ Retirement Insecurity in the United States – By Jennifer Brown and Diane Oakley – America’s $7 Trillion Retirement Crisis Is Only Getting Worse – Bloomberg – BySuzanne Woolley

Alonso Rodríguez Segarra

Founder & CEO Advise Financial

advise-financial.com

Alonso is a “CERTIFIED FINANCIAL PLANNER™” who is dedicated to increasing the Financial Well-being of nurses, physicians and successful immigrants in Florida and Texas. With more than 20 years of experience in the world of finance, always working for the best interest of his clients, under fiduciary criteria.