Hispanic Retirement Savings Gap

It’s past time we address the Hispanic retirement savings gap

By Nelson Peña

October 10, 2023
impr-latin-retirementa
How can financial service marketers help more Hispanics save for retirement?

It’s no secret that the U.S. Hispanic population continues to boom. From 2010 to 2020, Hispanics accounted for more than half of the country’s population growth, and the trend hasn’t slowed since. But even while becoming a larger portion of the country, Latinos as a group still lag behind in the use of financial services offered by U.S. companies.

This provides a unique opportunity for smart financial firms looking to connect with a largely untapped customer segment. To engage with the Hispanic market, it’s important to understand the specific needs, realities and attitudes of this underserved audience. But first, consider these sobering statistics:

  • Very few Hispanics are saving for retirement on their own. Only 8% of Latino households report having an IRA or similar private plan — compared with 33% of white households. For Hispanics who weren’t born in the U.S., the participation is even lower (see chart).

chart showing hispanic ownership rates of private retirement plans

  • More than two-thirds of Hispanics aren’t participating in any retirement savings plan. Of all Latino households with income, only 31% report that they are currently part of any retirement savings plan, including 401(k)s through their employer. This compares with 51% of white income-generating households. And again, the gap is especially large for the portion of the Hispanic community that was born in other countries (see chart).

chart showing hispanic ownership rates of employer sponsored retirement plans

Understanding unique views, attitudes and priorities

Why is the retirement savings gap so significant for U.S. Hispanics? Part of the answer may be found in the way Latinos perceive the financial services industry itself and in cultural attitudes about the role of money in their lives. Some key findings:

  • Most Hispanics don’t feel seen by the financial industry. Overall, 51% of U.S. Hispanics feel very or somewhat undervalued by the financial services industry. More than two-thirds (69%) say financial institutions do not meet their expectations, according to research by Univision/Harris.
  • For many Hispanics, there’s a lack of understanding of how the system works. Experts point out that many in the Latino community don’t have a long family history of investing and saving in the U.S., and, as a result, can fall prey to misinformation about it.
  • Hispanics tend to spend their assets on other priorities, rather than retirement savings. Most U.S. Latinos (52%) say they are financially tied to their extended families, compared to 33% for non-Hispanics, according to a study by Bank of America. More than a quarter (28%) say they support or expect to support their parents financially. (For non-Hispanics, the number is 12%.) Studies also show that Latino households hold more of their wealth in their vehicles and homes compared to other groups. In addition, studies show that one in four U.S. Hispanics hopes to start a business. These competing priorities leave fewer assets for investing in retirement savings.
  • Hispanics are a young audience that has yet to start saving and investing. It’s worth noting that the U.S. Hispanic audience is younger than the rest of the country. In 2020, the median age for U.S. Latinos was 30, versus 41 for non-Hispanic whites. This may be one reason that, as a group, Hispanics are saving less for retirement. But it also speaks to the potential power of this market as more Hispanics age toward traditional retirement-planning years.

The Opportunity

To truly connect with the Hispanic market, the financial services industry must build trust, provide practical solutions that match the Hispanic market’s needs and find new ways to improve their financial education efforts. Some ideas to start with:

  • Financial firms need to connect with the Latino market by providing culturally relevant and authentic content. It’s not enough to translate English-language content into Spanish. The Hispanic community expects content that comes from their point of view, featuring their needs and their stories. The context of extended family, for instance, can’t be ignored. Instead, it needs to be integrated into the messaging with an authenticity that resonates. (For more on how to create effective content for this market, see our Q&A with Alma CEO Isaac Mizrahi).
  • The industry needs to promote retirement vehicles, such as IRAs, specifically to the Hispanic audience, with educational material that cuts through misconceptions and offers clear explanations of the products offered. Fresh approaches are required to connect with audiences that have little experience with retirement planning.
  • Some Hispanic leaders have championed the idea of Latino financial mentors working with other Hispanics on topics of saving and investing, through social media and other avenues. For an audience that has low trust in financial institutions, these kinds of relatable role models can become a valuable conduit to share key information and improve financial education.

No one solution will magically help Hispanics bridge the retirement savings gap all at once. But this market is poised for growth, with the eventual result of more Latinos investing in their own retirements. When it happens, the movement will be led by the companies that recognize the opportunity and take steps to engage with this key market in authentic ways.

How are you connecting with Hispanic audiences? Let’s talk about how you can start building relationships with this largely untapped group, send a message and we would love to share some of our ideas.

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