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An amazing forty percent of Americans cannot maintain their living standards after they retire. Many are forced to scale back dramatically as they age. Why is that? Two reasons. Retirees are living longer than expected, and many simply did not have enough assets when they retired.

Where do Hispanics fit in all of this? Unfortunately, Hispanics have far fewer retirement assets than other Americans. They also have different perceptions about savings, investments, and financial planning. Many live paycheck to paycheck, and retirement planning isn’t on their radar.

TIAA, the pension company, recently released “The State of Hispanic Financial Wellness in the United States,” a comprehensive and relevant 3,345-word study. Later, The Wharton School and TIAA hosted an extended discussion on the topic, which is on the Internet as a video with text versions in Spanish and English. I also studied several Stanford School of Business reports about Hispanics and checked the Census to glean the latest information. I even learned a new meaning for the word HENRYs!

Retirement Realities

Hispanics are the largest non-Caucasian segment of the nation’s population. Representing 19 percent, they will reach 29 percent by 2060. One in four members of Gen Z is Hispanic. Yet, unfortunately, Hispanics’ personal finance knowledge is lower than the general population’s. The increase of younger workers and their advances in education and employment across industries highlight the need for Hispanics to make better financial decisions. Enhancing financial literacy, including an understanding of longevity, would help them attain a secure retirement.

Over one-third of Hispanic respondents in a recent study could not answer more than seven questions out of thirty on financial literacy correctly, almost double the Caucasian rate. Further, almost four in ten had weak longevity understanding, compared with 27 percent of Caucasians. Longevity literacy identifies how long the average person is expected to live after retiring. The weak longevity literacy score among Hispanics is particularly worrisome since Hispanics have a longer life expectancy than most Americans. They should prepare for a longer retirement.

Startling retirement gaps

Retirement security is obtained through consistent retirement savings and investments. But most Hispanics in their twenties and thirties live from paycheck to paycheck—there is no easy solution on the horizon.

When compared with others, Hispanics are:

 • less likely to have an emergency fund (46 percent versus 64 percent)

• less likely to have any type of retirement savings (52 percent compared with about 75 percent)

 • less likely to know how much they have saved for retirement (60 percent vs 75 percent)

 • more likely to say they are not confident that they can retire as planned (43 percent versus 38 percent)

 • more likely to say they will never retire (20 percent versus 15 percent).

Hispanics have fewer liquid assets and rarely have a financial plan. They also have lower access to employer-based retirement plans, and even when available, participation is lower. They feel that “retirement savings are not a priority relative to my family's current needs.”

Nearly half of Hispanics prefer cash savings rather than investing in equity markets. They prefer liquid, so-called low-risk investments such as cash. But these assets are eroded by inflation, so it is hard to accumulate wealth.

Studies indicate many Hispanics don’t trust the financial system, which impedes active participation in it.  

Some good news

Although Hispanics remain overrepresented in “service occupations,” they now make up 10.7 percent of management positions, a significant increase from 5.2 percent in 2000. 

Hispanic purchasing power growth exceeds non-Hispanics', 87 percent to 51 percent. Hispanic-owned businesses grow faster than their counterparts, representing $800 billion in annual sales. U.S.-born Hispanics ages 18 to 34 have more significant financial literacy than each age group of foreign-born Hispanics. The growth in the native-born Hispanic population, plus the increase in educational achievements, will probably decrease the gap in financial knowledge between Hispanics and others.

Hispanic high school graduation rates have increased from 58 percent in 1996 to a healthy 88 percent in 2021. Continued gains in higher education have helped decrease the gap and encouraged others to persist.

HENRYs

Hispanics who are “High Earners Not Rich Yet”—known as HENRYs— consist of participants ages 18 to 64, all earning over $200,000.

Although privileged, they often cope with complex multigenerational financial dynamics. They want to support their parents’ retirement, even to the detriment of their own retirement.  

Many Hispanics hold a deep-seated distrust toward financial institutions, stemming from historical marginalization and negative experiences. This distrust is a significant barrier to engaging financial services providers. Lower financial literacy amongst Hispanics exacerbates their vulnerability to predatory lending and results in lower savings.

One example: The Stanford Graduate School of Business reports that Hispanic female respondents identified access to financing as a barrier. Indeed, 17 percent of Hispanic female business owners said access to credit or loans is a major challenge, compared with 9 percent of white women or Hispanic men and 7 percent of white men. Women retire with 30 percent less retirement holdings than men.

In the Hispanic HENRY group, experiences with financial institutions were mixed: among interviewees, 44 percent appreciate effective investments, 34 percent cite a lack of trust, and 30 percent struggle with financial jargon. Two-thirds do not have a financial advisor. They prefer self-management, but are they prepared?

A shift exists from the “work for money” mindset of Hispanic HENRYs’ parents to a “make money work for you” approach. Valuing the strong work ethic instilled by their elders, Hispanic HENRYs are actively seeking ways to grow their wealth through investing and building diverse income streams. Over 90 percent find the phrase “make money work for you, not work for money” characterizes their financial goals.

Seven out of 10 cite a lack of financial education as a major barrier to achieving their savings and investing goals. Despite gaps in formal financial education, these Hispanic HENRYs demonstrate a strong desire to take control of their financial futures. They said that financial education would increase their likelihood of investing (76 percent) and that they’re learning through real-world investing experience (70 percent) and independent online research (74 percent).

Hispanic HENRYs are determined to overcome obstacles. Their top responses to wealth-building include owning mutual funds and real estate, exceeding the number of respondents who said they could improve wealth by engaging in “side hustles.”

This shift in wealth and financial security is evident as Hispanic homeownership has increased. While it still lags that of non-Hispanics, it increased from 45.4 percent in 2019 to 49.5 percent in 2021. At the same time, non-Hispanics decreased from 68.7 percent to 67.3 percent.

Bottom line

Hispanics are the fastest-growing demographic. Between 2010 and 2020, they grew by 23 percent, a much larger increase than the nation's overall 7 percent growth.

Hispanics should be more proactive in planning their retirement years, which may be longer than expected.

“Cash is trash”: don’t keep large amounts in low-interest bank accounts. Of course, cash should be set aside for emergencies to cover expenditures for three to six months. However, wealth accumulation for retirement and family security requires income-producing investments such as real estate and stocks.

Be careful of so-called financial advisors; most are just highly trained salespersons primarily interested in their commissions. Select “fiduciaries,” who must, by law, recommend what is best for their clients, not what provides them with high commissions.

Since people have lives to live, many simply purchase low-commission total market mutual funds. Vanguard, Fidelity, and Schwab have those funds with very low commissions—0.03 percent or none at all. Go to their websites and study them carefully before investing.