National Hispanic Heritage Month celebrates a population of 64 million who make up the Hispanic and Latino culture in the U.S., centering on vibrant communities while reflecting on the diverse and growing culture.
Yet, its arrival also reintroduces concerns regarding financial security and retirement savings within these communities—topics that have disproportionally impacted Hispanic and Latino groups in the U.S. As this month’s themes are prosperity, power, and progress, more experts and institutions are calling out the setback, and calling on employers and financial professionals for help.
Key factors driving impact
Hispanic and Latino communities have been vulnerable to financial insecurity in the past and continue to be today. A 2023 TIAA Institute report found that while 12% of workers halted retirement savings in 2022 due to inflation, this figure was 24% among Hispanic workers.
Another study by AARP showed that two-thirds of Hispanic American private-sector workers lack access to an employer-sponsored retirement plan, and research by the Economic Policy Institute estimates that only four out of 10 Latino workers have a retirement plan in their current roles.
“Have they been to any training, conversation, orientation, or mentoring around [retirement savings]? If not, of course there will be a barrier.”
Surya Kolluri, TIAA Institute
The numbers are especially troubling considering that Hispanic and Latino workers are projected to account for 78% of all net new workers between 2020 and 2030 and will make up 20% of the overall workforce by 2030, according to the HR Policy Association. “The Hispanic segment is lagging with retirement savings,” said Vidhi Sanders, head of Participant Outcomes at Capital Group, in an interview with 401(k) Specialist. “It’s also the fastest growing segment, so when two-thirds aren’t participating in the plan, there is an inherent issue there.”
Sanders pointed to intrinsic challenges engrained into Hispanic and Latino communities—ones that center on family and trust and take precedent over financial savings. For example, some may have to choose between caregiving for elderly parents, relatives, and loved ones over near- and long-term savings, others could feel uncomfortable talking about finances, while many may simply mistrust financial institutions due to prior inequitable and negative experiences.
“We learned there were inherent and cultural nuances that impacted Hispanic workers based on their upbringing that was addressable,” Sanders added. “Family dynamics play a big part in how they think about money.”
Job quality also plays into how workers will participate and engage with their financial and retirement savings, said Surya Kolluri, head of the TIAA Institute. Even as this community ranks first with the highest employment rate in the U.S., many are grouped into workforces that violate labor laws and offer small wages and even smaller employer-sponsored benefits. “Have they been to any training, conversation, orientation, or mentoring around [retirement savings]?” he emphasized. “If not, of course there will be a barrier. These could all be contributing to these lower numbers.”
Employer help and financial guidance
As a higher number of workforces turn to employee benefits for recruitment and retention strategies, Sanders urges employers and financial advisors to recognize the cultural nuances built into Hispanic and Latino communities and tailor their approaches wisely. “Family is important, language is a role, trust is an issue, and know how to address this with participants,” noted Sanders. “You need to resonate with them.”
Furthermore, explaining the process of a retirement plan, including how to allocate money into an account, how it is invested, what funds it is invested into, and when it can be withdrawn, along with explaining other financial savings strategies, could dispel a lot of that risk and mistrust that these communities face towards financial institutions.
And, hiring, and working with diverse and inclusive professionals, who share the same culture and background as Hispanic and Latino clients will also likely quiet that initial wariness.
Offering financial education and highlighting longevity literacy brings attention to whether participants have saved enough to last them through retirement, added Kolluri. Another TIAA report found that only a quarter of Hispanic workers see their longevity accurately, and even a lower number understand longevity terminology.
“If you educate people on how long they expect to live, their behavior, their thinking and actions change,” he said. “In addition to providing financial education, research shows we should provide input on longevity literacy.”
Kolluri observes how much of the retirement income discourse today has centered on the current savings gap and the need to save immediately, especially with underrepresented groups. Instead, he believes there is value in shifting the message to focus on longevity and highlighting income solutions products.
“The entire mindset so far has been this savings gap and the need to hurry up and save,” he said. “When we think about our early years, we should be thinking about building up insurance. When we get to retirement, we should change our mindset from insurance to income.”
SEE ALSO:
- Diverse Investors Lean on Financial Advice
- Black and Latino Employees Experience Lower Levels of Financial Confidence: Voya
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.