UpFront | Published in February 2017

Policy Proposals Could Help Hispanic Workers’ Retirement Outcomes

By PLANSPONSOR staff | February 2017
Although the Hispanic population is relatively young, the number of Hispanics ages 65 and older is expected to surge in coming decades. Census Bureau projections indicate that the number of older Hispanics will more than triple over the next 25 years and will account for 15% of the older U.S. population by 2040.
A report from the Urban Institute finds many older Hispanics face steep financial challenges because of employment histories marked by low-earning jobs that generally offer no retirement benefits.
These deficiencies earlier in their lives likely account for much of the financial hardship many older, retired Hispanics face, especially those born outside the U.S. In 2013, median earnings for men ages 25 through 64 who work full-time were 26% lower for U.S.-born Hispanics than for non-Hispanic whites, and 47% lower for foreign-born Hispanics. The earnings shortfall for U.S.-born Hispanic female full-time workers, ages 25 through 64, was much smaller relative to non-Hispanic whites, at 15% but still substantial.
In addition, working Hispanics are much less likely than non-Hispanic whites and non-Hispanic blacks to be offered retirement plan coverage by an employer or to be enrolled in a plan. In 2014, only 32% of Hispanic men ages 25 through 64, employed full-time, participated in an employer-sponsored retirement plan, compared with 54% of non-Hispanic white men and 47% of non-Hispanic black men. The comparable rates for women employed full-time were 38% for Hispanics, 57% for non-Hispanic whites and 50% for non-Hispanic blacks.
However, the fact that Hispanics tend to work longer than other groups promotes their retirement security.
Hispanics’ generally limited education does not fully explain their financial shortfalls in retirement. Even after the Urban Institute controlled for education, age, marital status and English-speaking ability, researchers found that older U.S.-born Hispanics received 20% less income than non-Hispanic whites, and foreign-born Hispanics received 28% less income.
Researchers also found that, among men employed full-time, U.S.-born Hispanics earned 7% less than non-Hispanic whites, and foreign-born Hispanics earned 14% less.
The institute suggests various policy options that might improve retirement security for this ethnic group. Work force development initiatives and efforts to promote education could enhance skills and raise earnings, boosting future Social Security benefits and allowing more Hispanics to save for retirement. Policy initiatives that promote retirement savings, such as state mandates requiring employers to offer automatic payroll deductions that would fund retirement accounts, could help narrow racial and ethnic disparities in retirement savings. Social Security reforms that increase benefit progressivity or create a meaningful minimum benefit would raise retirement incomes for people with low lifetime earnings. Finally, support for family caregivers and better financing options for paid long-term services and supports could help the many older Hispanics with disabilities and cognitive impairment receive the care they need and ease the financial burdens on their families.
Still, the institute’s projections suggest that retirement incomes will grow over the next three decades for both U.S.-born and foreign-born Hispanics. Compared with median age-70 income for people born in the 1940s—i.e., those reaching 70 in the current decade—researchers project that median age-70 income for people born in the 1970s will be 42% higher for U.S.-born Hispanics and 38% higher for foreign-born Hispanics.