SARAH ALVAREZ

On October 26, the Aspen Institute Latinos and Society Program and Financial Security Program hosted a panel discussion on the challenges impeding Latino retirement preparedness and household savings. The purpose of the discussion was to explore the policies, products, and approaches that could increase Latino financial security through improved access to retirement and savings plans.

The two programs also released a new research brief in conjunction with the event titled Si Se Puede: Building Retirement Security for Latinos and the US The report provides a snapshot of retirement readiness in the Latino community by synthesizing existing research from across government, academia, and the financial industry.

To launch the conversation, Abigail Zapote, executive director of Latinos for a Secure Retirement, presented an overview of the state of Latino financial security and its impact on the US economy. This overview highlighted the following:

  • 70 percent of Latinos have no assets in a retirement account compared to 37 percent of non-Hispanic Whites
  • The median income of Latinos is $42,500 compared to $60,300 for non-Hispanic Whites
  • 45 percent of Latinos own a home compared to 72 percent of non-Hispanic Whites

The state of Latino financial security will become an issue for all Americans if not addressed. Given the size of the Latino population — 18 percent today and on track to become 30 percent by 2060 — Latinos must be better equipped to save for retirement and household emergencies to avoid a future retirement crisis down the line when the overwhelmingly young Latino population approaches retirement age.

When presented with employer-based retirement plans, Latinos do participate. However, the reality is that many Latinos work in industries or jobs that do not provide these benefits. Therefore, identifying interventions that include the needs of these workers is a must. Other speakers discussed the role of financial technology, public policy, advocacy, and community-based financial institutions in lowering barriers to access, filling education and experience gaps, and building trust between communities and the organizations that serve them.

FinHabits founder Carlos Garcia explained, through his personal story, the importance of designing savings products with the end-user in mind. His mobile platform offers accessible and transparent terms and incentives designed for different Latino communities that help them to form effective savings practices. The vision and values of the company reflect one of the core messages reiterated during the panel discussion: many Hispanic families value savings and financial planning but lack experience or access to products that help them think about their long-term financial future. In response to this reality, Carlos explained how the simplicity, portability, and culturally competent design of FinHabits fills a short-term need for savings tools and also shifts conversations, within families, towards maximizing today’s earnings for future financial benefit.

Latinos must be better equipped to save for retirement and household emergencies to avoid a future retirement crisis down the line.

In addition to the role technology can play, public institutions can help increase access to savings products and reduce the cost of savings plans, for those without access to employer-based plans—a key barrier to retirement preparedness. Steve Juarez, Deputy Treasurer of California, discussed his state’s five-year effort to develop and launch California Secure Choice,a workplace retirement option for the seven million private sector workers currently without access. Fifty percent of this initiative’s target audience are Latino workers whose employers don’t offer retirement plans, many of whom would benefit from the flexible, portable, and secure savings tools offered through this plan. Not without its challenges, the program will contribute to a culture of savings that, through low cost and relatively low-risk savings plans, can begin to reshape the financial futures of many Californians and Latinos alike.

Designing programs like California Secure Choice can only happen with the consideration of and buy-in from the communities they aim to engage. Samantha Vargas-Poppe, Associate Director of the Policy Analysis Center at UnidosUS, explained that through its affiliate organizations, UnidosUS has engaged in community-based outreach to facilitate a feedback loop that allows public programs like California Secure Choice to understand and respond to the needs of community members. Through focus groups and other outreach via trusted community leaders, UnidosUS can help gather information about the nuances of the Latino financial experience. Such information enriches the design and marketing of California Secure Choice and other government programs aimed at benefitting those underserved by current savings tools in the market.

While technology and public policy are creating access points to savings and retirement products, community financial institutions like the Latino Community Credit Union work to build trust and confidence as the foundation for providing community members with the options and services that they need to secure their financial future. John Herrera, co-founder of Latino Community Credit Union, explained the importance of education and trust-building for the clients that his credit union serves. He shared, that, for some Latinos, their relationship with financial institutions is complicated—they lack either formal or informal knowledge about how to navigate the savings landscape in the US, they may mistrust financial institutions because of an experience in their country of origin or a predatory banking scam. This complex relationship does not diminish the importance of increasing access to retirement and savings tools either through employer-based programs or government initiatives. It does however, underscore the importance of trust-building as well as financial education and experience for improving current and future retirement preparedness among Latinos.

Together, interventions from the tech sector, public sector, advocacy organizations, and community-serving financial institutions can improve Latino financial security and in particular the rates of savings and retirement participation. Improving the products and tools available for savings and retirement will support Latino economic advancement, which, given the size and age of the population, will undoubtedly impact the US economy in terms of productivity, consumption, and overall stress on the social safety net system. Taking action on this issue now, while the Latino population is still relatively young, will pay dividends for Latinos and the country for years to come.