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Latinxs are living longer but saving less
Retirement planning causes many Americans anxiety, but Latinx individuals may face some unique challenges. A recent study by the Urban Institute found that Latinx retirees have 70% less saved on average than their Caucasian counterparts. Besides having less saved, Latinx people are outliving the overall population, which means more years in retirement. We all struggle to save for retirement, but why is it extra challenging for this community?
Many depend on family for financial support
There are some cultural norms that may be causing Latinx individuals to save less for retirement, like relying on family for financial and healthcare support. It’s not uncommon to see Latinx families living in multigenerational households, meaning that grandparents, parents, and children are all under one roof. The expectation that in retirement you will live with family causes some individuals to save less (or not at all) for things like assisted living or senior housing facilities.
Living with family can help ensure that you’re taken care of, but by saving enough for retirement, you could also be able to chip in for household expenses or an in-house caregiver when you’re older. This would allow you to be with family without inconveniencing them financially. By preparing for retirement early, you can lift some of the burden from your family’s shoulders and enable them to pursue their own financial goals.
Financial expectations in retirement may be lower
When many Latinx individuals think about retirement, they aren’t thinking about luxurious vacations around the world but time spent at home with family. Having lower financial expectations for retirement may be another reason why Latinx people are saving less.
Every person should set their own goals and expectations for retirement. However, keep in mind that each year things get more expensive with inflation. Even if you do plan on enjoying a humble retirement, things will be more expensive down the line. That’s why preparation is important.
Workplace hurdles to overcome
When it comes to saving, there can be some major hurdles within the workplace for Latinx individuals. Another study done by the Institute of Social Research found that Latinxs get up to 24% fewer callbacks from employers when job searching, which leads to higher unemployment rates and less leverage when negotiating salary. There is also drastically less access to workplace 401(k) plans and financial education among this community.
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Start preparing for retirement
The first step in preparing for retirement is to set a goal for yourself. Experts usually estimate that retirees will spend about 70% of their current salary per year in retirement, and the average person is retired for 18 years. If you multiply 70% of your current salary by 18, you will get a rough estimate of what your savings should be at the time of retirement.
Don’t let the amount daunt you. It’s important to understand that the sooner you start saving, the more your money can grow through compounding interest. If your employer offers a 401(k) plan, start setting aside money directly from your paycheck. Check with your employer to see if they match employee contributions, which will add even more to your savings. If your employer doesn’t offer a 401(K), then you may consider establishing an Individual Retirement Account (IRA) to build your own savings.
If spending retirement with family is your goal, imagine how much better it will be with the right preparation.