Hispanic Americans Face Retirement Saving Challenges

“The Hispanic American Financial Experience,” from Prudential Financial, finds that the Hispanic American community is moderately confident in its future outlook for household finances. The group is also moderately confident on the state of the local and national economies, as well as on the amount of attention given to its needs by the financial industry and government. 

In addition, the study finds Hispanic Americans have placed a priority on funding near-term goals, such as supporting multigenerational families. These factors, according to the study, make it difficult for the group to prepare for long-term financial goals.

The study also indicates that the complexity of programs such as Social Security, a lack of access to work-based retirement plans, and limited contact from financial advisers all act as barriers for members of this community to achieve long-term financial goals.

Current Focus on Near-Term Goals

With regard to retirement planning, the study shows that Hispanic Americans face distinct challenges. More than twice as many Hispanic Americans as the general population (15% compared with 6%), say that supporting elderly family members is a financial priority. In addition, 31% of Hispanic Americans place importance on funding the education of their children or grandchildren, compared with just 18% of the general population.

“The study shows that many Hispanic Americans have clear financial goals, but they may be unsure about how to achieve them,” says George Castineiras, senior vice president of total retirement solutions at Prudential Retirement. “We see an underestimation of how much money may be required to retire, a fact evidenced in part by lower participation in workplace-based retirement plans, lower rates of investing and longer expected time in the workforce, with three out of every four expecting to continue working during retirement.”

The focus on shorter-term financial objectives may hinder Hispanic Americans’ ability to set goals for savings and retirement. The study also reveals that the group has less access to workplace-based retirement plans and, even when given access, members of the group are still less likely to contribute to retirement plans.

Slightly more than half (53%) of Hispanic Americans say that saving for retirement is an important financial priority, compared with 62% of the general population.

Better Understanding of Retirement Issues Needed

Fewer than half of those surveyed for the study say they have a good understanding of Social Security, workplace-based retirement plans or financial products. In addition, 29% believe they will need only one source to fund retirement savings, compared with 19% of the general population. When it comes to considering financial products or services, Hispanic Americans cite trust of providers as the major barrier, while 14% say they have difficulty understanding the products and 13% don’t know where or who to go to for information.

“One major question raised by the study is whether Hispanic Americans would plan for their retirement differently if they had access to information that could help them generate the knowledge they need to make investments decisions to secure their own and their family’s futures,” says Castineiras.

Saving and Investing Habits

The study indicates that Hispanic Americans take a careful and conservative approach to financial planning. The Hispanic American community also revealed a cultural aversion to accumulating debt. Sixty-two percent say there is no such thing as “good debt,” yet seven in 10 indicate that it is nearly impossible to live debt-free, especially when it comes to big-ticket items such as a home, car, paying for college or starting a business.

Heading into 2014, the top financial resolution among Hispanic Americans is to pay down debt, yet only 38% feel confident they can achieve this. While more than 37% cite saving money as a goal, only 26% feel confident they can attain it. Just 13% say they will contribute more to a 401(k) or other retirement plan, and in that group only 31% feel very confident that they will be able to do so.

Supporting family lies at the heart of many financial priorities for this community, very often making family finances multigenerational and global. According to the study, nearly one out every six Hispanic Americans supports their parents, and 42% of non-U.S. born Hispanics send money to relatives in their home country. Additionally, one-third of the study’s respondents intend to spend their retirement years partially or fully outside the United States.

“The study suggests the significant economic impact that Hispanics have on their families and communities both within and beyond our border,” says Alexandra Galindez, Prudential’s vice president of multicultural marketing. “As the Hispanic American population continues to grow in the U.S., it becomes increasingly important to provide the community with financial information that can help build wealth, as it could have a tremendous impact on the U.S. economy and abroad.”

Contact with Financial Advisers

The study also revealed that Hispanic Americans, regardless of their income level, receive less contact from financial advisers or professionals that could help them gain the knowledge they need to plan for their financial future. The study’s authors suggest that having more access to information and advisers who can help individuals make financial decisions could lead to higher confidence rates, as well as more solid planning for reaching retirement goals among Hispanic Americans.

While the study shows that the biggest gap in financial confidence among Hispanic Americans is between those with and without a financial adviser, establishing a relationship with an adviser proves challenging. Compared to the general population, Hispanic Americans are half as likely to have a professional financial adviser or to have been contacted by an adviser. However, when contacted, this community is equally as likely to work with a financial professional as the general population.

Prudential’s study was conducted among Hispanic Americans with a household income of $25,000 or more and found that even among Hispanic Americans with a household income of $75,000 or higher, and regardless of country of birth, there is a gap in understanding financial products and services when compared to the general population.

The study consisted of an online survey administered by GfK Custom Research, Inc., in both English and Spanish, from October 28 to November 18, 2013. This survey polled 1,023 Americans who identify themselves as Hispanic and questions covered a broad range of financial topics.

Prudential Financial, Inc. is a financial services provider that offers retirement-related services, as well as life insurance, annuities, mutual funds and investment management.

The study results can be downloaded here.