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Data and Research August 30, 2023
Hispanic Workers Continue to Lag in Retirement Savings
Access gap, low employer matches and a lack of tax benefits discourage workers from participating in retirement plans, Boston College research shows.
Reported by Remy Samuels
Because of widespread lack of access to a retirement plan, many Hispanic workers are falling behind in retirement savings, according to the Center for Retirement Research at Boston College.
Only three out of every 10 Hispanic workers are participating in an employer retirement plan, and CRR attributes this to the fact that many of them are employed in low-wage blue-collar or service industries that often do not offer any employee benefits.
These jobs, such as roofing, dishwashing, food preparation, landscaping, hotels, maid and janitorial services are also often filled by recent or undocumented immigrants, according to the researchers.
Other important factors to consider is that many undocumented workers may be paid in cash, and therefore are saving more than the data might suggest. These workers may also be sending money back to their home country where they are either buying or building a house that they can use when they retire and return home.
The Economic Policy Institute estimated that only four out of 10 Hispanic workers have a retirement plan in their current jobs. On the positive, the bulk of individuals who have a retirement plan take advantage of it, as three out of four Hispanic workers who have access to a plan are participating in one.
In addition, the EPI argues that low pay, low employer matches and low or no tax benefits discourage participating in defined contribution plans that require workers to contribute to the plan and take a penalty if workers need to access the funds before age 59½.
However, the CRR points out that the lack of retirement savings is particularly concerning as life expectancy among Hispanic men and women is higher than among non-Hispanic, white men and women.
But at the same time, retirement saving for future generations is looking more positive. The number of Hispanic people with at least a bachelor’s degree has more than doubled over the past 15 years, and research has shown that more educated people, who usually earn more, are also more likely to have an employer retirement plan.
College attendance varies across ethnic groups, though, as people of Cuban descent are among the most likely to have a bachelor’s degree, whereas people of Mexican descent have one of the lowest rates of college degrees and Puerto Ricans have among the lowest incomes – both indications that they are in the types of jobs that do not provide a retirement plan.
Kezia Charles, a senior director at WTW, says financial literacy is also an important part of the puzzle and recommends that employers work with employee resource groups or affinity groups to help certain segments of their participants with financial literacy and financial awareness.
“We are seeing more and more employers … looking at the diversity of financial planners to ensure that people are able to find someone they can relate to, and they can have a meaningful conversation with,” Charles says.
She adds that another tactic that some employers have invested in is allowing family members access to financial wellness benefits, such as online trainings and financial literacy tools.
“We know that for many people, the decision that they’re making about how to use their money [is] not just an individual decision. It’s also about providing resources for their families,” Charles says.
The retirement savings gap has been a focus of both federal and state policymakers, with SECURE 2.0 Act legislation boosting incentives for workplaces to offer retirement plans, and some states mandating employers provide the benefit.
