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Hispanics' retirement savings lag, study shows
Michael D. Hernandez
El Paso Times

Hispanics lag far behind the rest of the American work force when it comes to saving adequately for retirement, and more than half of households of Hispanics aged 55 to 59 have nothing put away in retirement accounts, a study released Wednesday shows.

Low participation in retirement plans such as a 401(k) or individual retirement accounts, few incentives from the federal tax system to set aside money for long-term savings and a reliance on Social Security benefits are some of the factors fueling the problem, the study by the Pew Charitable Trust's Retirement Security Project and the National Council of La Raza found.

Before she began working at a local bank, Central El Pasoan Cindy Willis admits saving for her retirement was hardly a priority.

"When I was younger, I thought I didn't really need to get something like that," the 31-year-old Hispanic said about initiating a retirement plan. "I wasn't really informed about 401(k)s or anything, but because I was working with that all around me, I decided it was a good idea to start one."

Willis counts herself lucky for arranging her employer-based retirement plan, and said she is urging her husband to do the same.

The study also shows that Hispanics with retirement accounts have less than one-fifth the retirement savings of the overall work force; only one in two Hispanics has a basic checking or savings account; and 43 percent of Hispanic workers surveyed defined their knowledge of investing or saving for retirement as "knowing nothing," compared to 12 percent for all workers.

But several financial planners in El Paso believe Hispanics in recent years have become more savvy about retirement savings.

"I can definitely see a shift where Hispanics are realizing they can't rely on Social Security for their retirement years," said Michael A. Flores, an investment representative with Edward Jones. Flores said Hispanics make up about 65 percent of his client list.

"Leaving your money in a bank account, sitting in a safety deposit box or stashed under the mattress is not wise, and I think more people understand that now," Flores said.

According to the U.S. Census Bureau, Hispanic Americans are the fastest-growing segment of the population at or near retirement age. The number of Hispanics 65 years or older is expected to increase from 1.7 million in 2000 to about 15.2 million by 2050.

The study suggests reforms in financial and tax policies and an emphasis on more financial counseling could help boost retirement savings for Hispanics.

Among the study's recommendations for increasing savings:


Allow companies to automatically enroll new employees in 401(k) accounts in predetermined plans, with increases in contributions as the employee's income rises. Allow employees to opt out and to roll over the money to an IRA automatically when they switch jobs.


Allow U.S. households to deposit a portion of tax refunds into an individual retirement account (IRA). Currently, taxpayers can only put the money in one account, making it less likely that money will go to retirement savings.


Change tax laws so lower- income workers can benefit from tax breaks for savings and investments.


Allow recipients of public benefits such as Medicaid and food stamps to have more retirement savings and still qualify for the benefits.


Promote financial planning in the workplace and through federal policies.

The recommendations have been endorsed by groups as diverse as the conservative Heritage Foundation think tank and the liberal-leaning Center on Budget and Policy Priorities, as well as both Democratic and Republican lawmakers.