A Matter of Culture

One of the best ways HR and benefits leaders can reach Hispanic American employees with retirement programs is to tailor them to balance specific cultural and financial needs.

Tuesday, February 25, 2014
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When it comes to saving for retirement, Hispanic American employees face some very challenging cultural and historical roadblocks.

Even with that, two recent studies -- one by Prudential Financial and one from ING U.S. -- report that those existing retirement planning barriers can be overcome by HR and benefits leaders through a combination of creative strategies.

Prudential's 2014 report, The Hispanic American Financial Experience, found that Hispanic Americans in the workforce are moderately confident in their outlook for household finances, the local and national economy, and the attention paid to their needs by the financial industry and government. At the same time, they also place a priority on funding near-term goals, especially supporting their multigenerational families.

According to the 1,023 Prudential study respondents, those conflicting factors (and a few others) make it difficult for working Hispanic Americans prepare for long-term financial security. Other barriers to achieving long-term goals include the complexity of programs such as social security, a lack of access to work-based retirement plans, and limited contact from financial advisors.

In addition, more than twice as many Hispanic Americans as the general population (15 versus 6 percent) say that supporting elderly family members is a financial priority, and 31 percent of Hispanics place importance on funding education for children or grandchildren, compared with just 18 percent of the general population.

"The study shows that many Hispanic Americans have clear financial goals, but they may be unsure about how to achieve them," says George Castineiras, senior vice president of total retirement solutions at Prudential Retirement in Hartford, Conn.

Castineiras says that, among Hispanic Americans, he sees an underestimation of how much money may be required to retire, a fact evidenced in part by lower participation in workplace-based retirement plans, lower rates of investing and longer expected time in the workforce, with three out of every four expecting to continue working during retirement.

In its survey titled Retirement Revealed, ING U.S. reports, among other findings, that Hispanics tend not to think as much in terms of future retirement goals. For example, 57 percent have never calculated how much money they'll need to continue their current lifestyle, and 70 percent do not have a formal investment plan to reach their retirement goals

ING U.S. also found that 57 percent of Hispanic Americans expect their employer to do more to educate them about retirement options (compared to 47 percent overall), and Hispanic Americans define insufficient income (31 percent), high debt level (26 percent) and lack of knowledge about their options (18 percent) as their biggest barriers to saving, according to Rick Mason, president of corporate markets for ING U.S. Retirement Solutions.

Castineiras adds that Hispanic Americans' focus on shorter-term financial objectives also hinders their ability to set goals for savings and retirement. The study revealed they have less access to workplace-based retirement plans but are still less likely to contribute even when they do have access.

Participants in the Prudential study said supporting family lies at the heart of many of their financial priorities, very often making family finances multigenerational and global. According to the study, nearly one out of every six Hispanics supports their parents, and 42 percent of non-U.S. born Hispanics send money to relatives in their home country. Additionally, one-third of the study's respondents intend to spend their retirement years partially or fully outside the United States.

"The study suggests the significant economic impact that Hispanics have on their families and communities both within and beyond our border," says Alexandra Galindez, Prudential's vice president of multicultural marketing in New York. "As the Hispanic American population continues to grow in the U.S., it becomes increasingly important to provide the community with financial information that can help build wealth, as it could have a tremendous impact on the U.S. economy and abroad."

For HR and benefits leaders, the challenge is to create specific programs within an overall benefits strategy that can get Hispanic Americans not only thinking more about retirement planning, but also giving them the tools and resources to help make it happen.

For example, both the Prudential and ING U.S. studies found that Hispanic Americans, regardless of income levels, receive less contact with financial advisors or professionals. So making a stronger connection between Hispanic American employees and financial advisor-based help could be one way for HR to have an impact. Another important issue is educational programs that resonate with Hispanic Americans.

To that end, Leticia Miranda, senior policy advisor for economic security policy at the National Council of La Raza in Washington, the largest national Hispanic civil rights and advocacy organization in the U.S., says educational programs specifically focused on Hispanic Americans are a good way to begin to change the status quo.

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"Education is very important for this community, as well as for all workers," Miranda says. "Having to make decisions about where to invest are important and need to be made with information, so plan sponsors need to focus on their Hispanic American workers with tailored educational programs.

"For plan sponsors, financial planner access and education events are incredibly important," she adds.

Language can be another barrier that must be eliminated to help encourage savings.

"HR and benefits decision makers can help ensure that Hispanic employees' needs are covered when it comes to retirement planning, by working with providers that offer education materials in-culture and in-language for this group," says Mason. "Language can be a barrier for this group so having materials that are customized makes the concept easier to understand and easier for employees to engage."

Both Miranda and Castineiras agree that an auto-enrollment feature -- as part of an effective plan-design strategy HR can deploy -- can go a long way towards encouraging Hispanic American participation.

"Hispanics may be less likely to participate in an employer-sponsored plan, but with auto-enrollment you can really reduce the disparities that you see today," she says, quickly adding that the auto-enrollment contribution rate needs to be closely scrutinized, because a high default contribution rate could push employees in the wrong direction.

"You can do auto-enrollment, but be careful [because] contribution rates are realistic and can be easily adjusted," she says.

Castineiras says another recommendation for HR that has worked in every situation he's seen is making sure HR understands the Hispanic American household mindset; specifically, that their priorities are education for kids and having enough money to support extended family members -- which he says is true for nearly 50 percent of all Hispanic American households.

"If you send out an invitation for a retirement planning meeting, you must invite significant others, including both children and spouses," he says. "Hispanics don't make decisions in isolation. But most of all, do not bypass the primary female family member. When you engage the key female family member, it drives the behavior.

"Make it relevant, but by all means talk to the woman in the household," he says. "They make the major decisions more times than not."

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