Catching Up

While Hispanics are not saving adequately now, they can catch up.

By Lucretia DiSanto Jones

Scan the business sections of the popular press and you can’t miss it: Americans are not saving enough for retirement.

While this is certainly true for the general population, the cause for concern about the saving rate of Hispanics is even greater. The Pew Charitable Trust’s Retirement Security Project study estimates that half of all Hispanic households aged 55 to 59 have no assets accumulated in a 401(k). Furthermore, only half of Hispanics have a checking or savings account. Hispanic Americans realize, however, that they are not knowledgeable about investing or saving for retirement.

There are ways to turn the situation around, though, according to the study. They include making it easier for Hispanics to save, increasing incentives to save and promoting financial counseling.

Keep it simple
The study specifically suggests that policymakers and corporate leaders make it easier for workers to save for retirement by automating 401(k) plans through automatic enrollment, escalation, investment and rollover, and by allowing direct deposit of tax refund monies into IRAs.

While these are not 401(k) program changes that an advisor can implement, he can take the lead in trying to persuade his Hispanic clients to adopt these changes in their own ways. A first step may be a solid review of the 401(k) with individual clients. Participation in these plans requires workers to make decisions regarding their contribution levels and investment options. Unfortunately, confused or overwhelmed by the choices, some individuals simply choose not to participate at all. Education and guidance from an advisor may prompt some clients—particularly Hispanic clients weighed down by the process­—to not only enroll in their employer’s plan, but also to stay actively involved in how his account progresses from year to year.

For those clients who seem interested, enroll, then walk away, an advisor can provide encouragement. For example, as advisors are planning marketing and contact-maintenance campaigns, they should include an effort to continually and consistently remind Hispanic clients to give attention to their 401(k) plans. Why? An employer may not be committed to increasing participation in its 401(k) plan, whereas advisors should certainly be committed to encouraging clients to enroll. It would benefit the client and the advisor.

From Uncle Sam to an IRA
In addition, many Hispanic clients gladly anticipate receiving a tax refund from Uncle Sam. True, many use it to chip away at credit card and other debt or go on a spree. But advisors who can help train their Hispanic clients to take a portion of their refund and deposit it into an IRA will be providing a great service.

To view the Retirement Security Project study, visit www.retirementsecurityproject.org.