No way out of Social Security for Hispanics | VOXXI

Latinos face unique challenges at the time of retirement. Among the many difficulties Hispanics need to overcome when planning for the ?golden years? some shortfalls are economic but others are cultural in nature.

According to the Retirement Security for Latinos report, ?over half of Hispanic households aged 55 to 59 have no accumulated assets in a 401(k) or IRA. A variety of other measures confirms that Latinos are disproportionately likely to be undersaving? When surveyed, 43 percent of Hispanic workers described their personal knowledge of investing or saving for retirement as ?knowing nothing? compared to 12 percent for all workers?.

Since 2000, the report says, 1.7 million Hispanics have faced retirement, many solely depending on Social Security and Medicare, but also living under the line of poverty. In 2009, the U.S. Census reported that 18.3 percent of Hispanics age 65 and older live in poverty, compared to 7.5 percent for older whites, being the poverty threshold very low ? $10,326 for single persons of that age. The challenges will only get worse as 15.2 million Hispanics are projected to retire in 2050, making them the fastest growing community into the system.

So far, elderly Latinos manage to survive due to established ?and encouraged? family values, including living with their married children, having a single child caring for them, or returning to their country of origin where extended family and/or their own grown children still reside. In most Latin American countries, a U.S. small pension can make a big difference in the family?s budget and most relatives are happy to welcome them into their homes.

Living with family and/or extended family ?Hispanic households tend to be multi-generational and include other relatives such as cousins, uncles and aunts- can also provide not only financial help, but also the necessary emotional support system elderly Latinos need, while assigning them a task, usually watching over small children and helping with house chores.

However, due to acculturation, many elderly Latinos ?and their children? are seeking an independent life and staying at home. Living in familiar neighborhoods with a known support system and avoiding adjustments to a new family life are just some of the reasons why elderly Latinos prefer to stay in their homes, sometimes even facing economic and health hardship or the risk of living in densely populated and economically depressed ?barrios?.

What are the challenges Latinos face when planning or saving for retirement?

• Many young Latinos hold lower-paying jobs in disenfranchised industries ?such as construction, landscaping, farming, part-time and temporary employment-, jeopardizing their early contributions to the system.
• Because of lower-paying jobs, multi-generational living conditions and a larger birth rate, Hispanic households can save less for retirement.
• In addition, many Latinos are economically responsible for extended family ?their parents- and/or children left behind in their countries of origin, generating large remittances abroad.
• As a community, they are younger, and they will contribute longer to the system at a lower rate. However, they are considered the system?s backbone, supporting the retirement of the baby-boomer generation and a declining birth rate.
• Many Latinos come from countries with a public pension system, which guarantees a small minimum income to retired seniors, and continue to trust the public system in the US. Private pension reform, widely instituted in several Latin American countries during the 1990s, proved to be inadequate for those countries after the global financial collapse of 2008.
• Due to the lack of knowledge of private retirement options, Hispanic workers are less inclined to participate in an employment-based retirement or long-term asset plan.
• Almost a third of Hispanic workers borrow from their retirement accounts due to hardship or unemployment, putting at risk their long-term security.

So what can young Latinos do to change their prospective chances of depending solely on Social Security? In addition to pursuing higher and alternative education that will improve job opportunities, changing cultural behaviors will depend greatly on the options found in their communities and the workplace.

A greater financial educational effort, an ?investment? the federal government and the private sector should jointly consider, could encourage Latinos and other minorities to contemplate private retirement options. Both sectors could benefit greatly, the first by lowering the pressure into the system, the later gaining clients into their retirement funds.

The federal government could affect low- and middle-income Latinos and other minorities saving efforts by? ?increasing incentives on savings. Currently, the federal tax system applies unreasonable taxes on low- and middle-income families, allowing little room in savings for hardship or retirement.

Finally, states could mandate financial literacy and planning from a young age in public schools and colleges, and encourage employers to design comprehensive savings plans that will consider and include cultural perspectives.

Source: http://voxxi.com/2012/02/03/no-way-out-of-social-security-for-hispanics-voxpopuli-economy/

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