For Latino Immigrants and Their Families, Retirement is a Tricky Thing

Several posts this month have addressed household wealth (or the lack of it) among minorities and, as part of a related thread, the duty that children of immigrants feel to help out their elders financially. So what comes next? Retirement, which involves every generation. And it’s not a bright picture, for Latinos especially.

Latinos were the group hit hardest during the recession, with their household wealth on average plummeting by 66 percent since 2005, according to a recent Pew Research Center study. But even before the financial crisis hit, Latinos – followed by black Americans – were the least likely to have have an individual retirement account or any similar kind of retirement arrangement.

Latinos rely heavily on Social Security for retirement income. Many, especially first-generation immigrants, work in jobs that don’t provide retirement plans. And among those who do, there is a tendency not to invest in these plans, for fear of lacking day-to-day cash flow and other factors.

Several studies have addressed Latinos’ retirement quandary, but I’d like to resurrect a particularly exhaustive one from three years ago that took into account not just the prospective retirees, but their children who are one day expected to help support them.

In 2008, the University of Notre Dame’s Institute for Latino Studies examined Latinos’ retirement income and its effect on their families. Part of the study included a focus group with Mexican, Puerto Rican and Cuban immigrants and their families in Chicago. “These discussions with both seniors and adults with retired parents reveal that neither the retirees nor their extended families have sufficient income to live comfortably now,” the report reads, “let alone to prepare for the future.”

From the report:

With respect to individual savings, none of the participants had Individual Retirement Accounts. Most did have bank accounts, which are used to pay taxes, mortgages, and other expenses rather than to build retirement savings. As a consequence of their exclusion from formal retirement savings plans, these Latino workers will be depending upon Social Security for future support, but some are uncertain that Social Security will be solvent by the time they retire.

They are anxious and apprehensive about the day when they and/or their spouses will retire from the work force. “What is awaiting us?” a participant posed rhetorically to her group. Another participant who used understatement to express his concern about his future stated, “We need a little bit of help. We’ll try to manage as we do now—by paying the minimum.”

…The Latino seniors and adults who participated in the focus groups take for granted a culture of familial interdependence and mutuality. The Latino working adults who participated accept that they have an obligation to support their elders. Significantly, one participant stated that her parents thought of their many children as “their retirement.”

Then there was this, an attitude not uncommon among immigrants to the U.S.:

Both seniors and current workers in the focus groups also expressed their hope that government programs and business policies will change in order to address this looming crisis.

Having immigrated to the continental United States from areas where poverty is widespread, these Latino focus group participants do not accept the idea that “this rich country” would neglect its senior citizens. They believe that this society is affluent enough to ensure that people who have worked hard all of their adult lives retire in comfort and dignity.

Those facing the retirement of a parent have their work cut out for them.

The report made several policy recommendations, including the use of of more inclusive, and perhaps mandatory, pension plans suitable for low-wage workers. It also warned against Social Security reforms “that give individuals decision-making responsibility for their Social Security funds.” (Because of the heavy dependence on Social Security, the League of Latin American Citizens and other Latino advocacy groups recently created Latinos for a Secure Retirement, an organization to lobby against threatened Social Security cuts.)

Other recommendations in the Notre Dame report included the promotion of what is referred to as “financial literacy” and financial planning among Latinos by banks and advocacy groups, which already occurs to some degree. The financial services organization TIAA-CREF, for example, launched a Spanish-language website last year.

But some of the most pressing work is to be done at the household level, and this involves addressing common mistakes and misperceptions. The consumer advocacy nonprofit Consumer Action has an interesting set of tips for working with Spanish-speaking (i.e. first generation) Latinos and how to address some of their most common financial mistakes, including mistrust of financial institutions and company savings plans, approaching the wrong people for advice, and being too embarrassed to ask questions.

Read the full article here.