Retirement – Will You Be Ready?

When asked about where their future retirement income will come from, most workers expect the major portion to come from Social Security (38 percent), an employer sponsored retirement savings plan like a 401(k) (37 percent), and/or a traditional employer-provided pension (31 percent). Most current retirees get their current income mostly from Social Security (52 percent), a traditional employer-provided pension (33 percent), and/or savings plans such as a 401(k) (24 percent).

According to the study, many current workers are concerned that their employers will reduce or eliminate their pension or health care benefits before or during their retirement (52 percent of Hispanics who are, or whose spouse is, employed, compared to 39 percent among non-Hispanics). Fueling this fear is that, in the past five years, 12 percent of those surveyed have already seen their employer eliminate their traditional defined benefit pension plan, frozen or reduced existing traditional pension benefits (13 percent), changed a traditional pension plan into a defined contribution plan (22 percent), or reduced health care benefits (45 percent).

The survey also asked what sources of financial information respondents use and find most useful when making financial decisions. For those who are married, the number one source used was a spouse’s input. Second most useful (at 48 percent) were banks or other financial institutions. Next came family, friends, or coworkers (43 percent), and/or newspapers and other written materials (39 percent).

The last part of the survey dealt with various savings and investment vehicles respondents currently use for their money. The majority of Hispanic adults currently have their money in a checking account (65 percent), followed by a regular savings account (49 percent), and an employer-sponsored retirement savings or investment plan such as a 401(k) (35 percent). Fewer than two in ten report having some money invested in mutual funds (18 percent) or individual stocks (15 percent).

The overall financial goals of Hispanics age 40 and over are similar to non-Hispanics who participated in the study. Just like everyone else, Hispanics say that “paying the bills” is their most important priority (over 90 percent say it is “very important”), followed by “have enough money for you and your family to live well” (84 percent), “make sure your children or grandchildren can go to college” (83 percent), and “be able to stay in your house or apartment as you get older” –  and “save for the retirement years” (both at 81 percent).

What is very evident from the survey results regarding financial goals is the importance that Hispanic adults give to family and to providing for one’s family and children, including children’s education. “Making sure that children or grandchildren can go to college” (83 percent see it as “very important”) is among the top three most important goals among Hispanics. In fact, it reaches levels of importance that are significantly higher than the levels seen in the rest of the population (57 percent), regardless of the age or working status of the respondent.

In addition, Hispanic adults age 40 or older (at 58 percent) are substantially more likely than non-Hispanic adults (44 percent) to feel that leaving money behind for their children or grandchildren is very important.

Unfortunately, according to the survey, the ultimate reality is that the overall levels of current savings and investments for retirement among Hispanic adults age 40 and over are rather low. While it’s true that one in ten households of Hispanic current workers have accumulated $250,000 or more in total household savings and investments so far, far more (two-thirds of respondents at 65 percent) report total household savings and investments of less than $25,000, excluding the value of their home and any employer-sponsored defined benefit plans.