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Study Suggests Latinos Face Significant Retirement Savings Gap

Disparities in access to and eligibility for employer-sponsored retirement plans are resulting in a persistent retirement savings gap for Latinos, according to a new report.

Based on data from 2014, the report by the National Institute on Retirement Security (NIRS) and UnidosUS finds that only 31% of Latino workers participate in an employer-sponsored retirement plan, compared to 48% of all workers age 21 to 64. The research also shows that nearly 54% of Latinos worked for an employer that sponsored a retirement plan compared to nearly 70% of all workers age 21 to 64.

As part of the backdrop, authors Jennifer Brown, a senior economic policy adviser at UnidosUS, and Diane Oakley, NIRS executive director, explain that Latinos make up the largest minority group in the U.S. workforce, comprising nearly 17% of the labor force in 2016. In addition, they cite U.S. Census Bureau estimates showing that by 2060, the Latino population will number 119 million and will make up approximately 28.6% of the nation’s population. Given these trends, the authors stress the importance of addressing the various retirement security challenges facing Latinos, as their economic security and wellbeing will have a significant influence on the national economy.

Eligibility and Take-up Rate

In addition to having the lowest level of access to employer-sponsored retirement plans, the research found that Latinos also have the lowest rate of eligibility for the retirement plans offered by their employers. Among Latinos with access to a retirement plan, only 60% percent also meet the eligibility requirements set by employers, compared to a nearly 73% eligibility rate for all workers.

Brown and Oakley observe that this could be because many Latinos have not worked for their employer for one year, work part-time, or are under 21, making them ineligible to participate.

Yet, when Latinos have access to and are eligible to participate in a plan, they show slightly higher take-up rates compared to others races and ethnicities. When Latinos are eligible to participate in an employer-sponsored plan, their take-up rate is 95.4%, compared to 94.9% for whites and 94.6% for non-whites.

“The high take-up rate among Latinos – higher than all other groups – indicates that when given the opportunity to save for retirement, Latinos recognize the value of saving and participate in these plans,” the authors suggest.

Somewhat surprisingly, the report further shows that only 21.6% of Latinos have $1 or more saved for retirement. In addition, it notes that overall, fewer than 1% of Latinos have retirement accounts equal to or greater than their annual income.

When limiting consideration to only workers who are saving, more measurable differences emerge, but they still appear to be cause for concern. Latinos with a retirement savings account had an average account balance of $21,861, the report notes. That is significantly less than that of whites, who had an overall average of $76,234. Broken down by age, younger Latinos between the ages of 21 to 34 had an average balance of $4,993, while older Latinos between the ages of 55 and 64 had a balance of $42,335.

“The latest data in this report reinforce the persistent barriers to retirement readiness facing Latinos,” notes Samantha Vargas Poppe, director of the Policy Analysis Center at UnidosUS. “What is particularly concerning about the report’s findings is that, while Latino workers have the highest rates of take-up when offered and eligible for a plan, they have the lowest rates of access to a retirement savings plan.”

Policy Options

The report emphasizes that it’s critical for stakeholders to expand eligibility and access to employer-sponsored plans to increase the number of Latinos who could save for retirement. “Policymakers at the federal and state level are positioned to provide access to and encourage retirement savings and begin reversing long-standing disparities in retirement security,” the report states.

Among the suggested policy options to benefit Latinos and all workers:

  • Allow part-time workers the ability to participate in employer-sponsored retirement plans

  • Further promote the Saver’s Credit, which many workers are not aware of

  • Further develop state retirement savings plans to assist with providing low-cost retirement products to working Latinos and other Americans not covered by a workplace retirement plan

“State-sponsored retirement plans that are taking hold across the nation also can play a big role in improving the retirement outlook for Latinos,” notes Oakley. “Such plans target working Americans who lack access to employer-sponsored retirement plans and less than half of Latino employees in the private sector have access to such plans,” she adds.

Building on a 2013 report, the study, “Latinos’ Retirement Insecurity in the United States,” is based on 2014 Survey of Income and Program Participation (SIPP) Social Security Administration (SSA) Supplement data from the U.S. Census Bureau.