U.S. Latinos will have $113 trillion in wealth by 2050 — but there's a generational divide in retirement planning

By Alessandra Malito

Some older Latino individuals save for retirement by sending money overseas, while many younger workers choose to invest

Carlos Garcia, who comes from a Latino household in Texas, didn't know what a 401(k) was until after he graduated from MIT and started his first job at Merrill Lynch. Now he runs a company that offers these retirement plans to small businesses.

"It's probably happening every day with new generations of Latinos that are graduating," Garcia said.

When he started working, Garcia found many financial tools and institutions existed that were not readily accessible to all workers. The company he founded, Finhabits, aims to fix that by offering IRAs and 401(k)s and providing educational content in both English and Spanish.

"At the end of the day, the financial institutions that currently are operating, they need to understand that these legacy systems do not work for everyone," Garcia said.

Retirement planning can look vastly different between older and younger generations of U.S. Latinos, as well as those who are immigrants versus descendants, or who came to the United States with family or solo. Older relatives may send money back to the country they emigrated from to help family members who remained, or in hopes of building a home where they will live out the rest of their lives. Younger generations, meanwhile, might use the stock market to grow their wealth and stay in the U.S., experts said.

Hispanics ages 65 and older earn less, have less in wealth and are more likely to struggle financially than their non-Hispanic counterparts, according to a 2016 study from the Urban Institute. The gap can be attributed to many factors, including lower earnings and a lack of workplace retirement plans, as well as having less time in the U.S. workforce, which affects Social Security and other retirement benefits, the report said.

That may not always be the case, however. Median income for older U.S.-born Hispanics has "grown substantially" between 1979 and 2013, more so than other demographics, the Urban Institute found. A recently published report on Latino wealth makers from Finhabits, a bilingual financial-wellness platform, found that the 70 million people who make up the Latino market -- or 20% of the U.S. population -- could expect to accumulate $113 trillion by 2050.

Of course, many situations could change the circumstances of how people plan for retirement, including if an entire family immigrated to the U.S. versus just one member. In the latter case, that individual might send money back to support the family since the conversion rate is "advantageous," said Maribel Francisco, a money coach for documented and undocumented immigrants and founder of Our Wealth Matters. If it's an entire family, the parents might send money back to a trusted individual who will help them build their retirement home.

"Sometimes you go back there and there's a house, half a house or no house," Francisco said.

Luis Rosa, a certified financial planner who works with many first-generation workers, immigrated to the United States from the Dominican Republic when he was 11, and is now one of a handful of CFPs who identify as Hispanic or Latino. Only 3% of the more than 97,000 CFPs are Hispanic or Latino, according to the CFP Board, which administers the certification.

Rosa, who also has a podcast called On My Way to Wealth, said he has seen older immigrants who focus primarily on owning a piece of real estate in their country of origin and only need spending money for the basics, like food, while younger generations will take advantage of investing.

"They want more because they no longer have a connection to the country of origin," he said. "They want to have more experiences in the meantime."

There aren't always enough resources to help make sense of money management, Francisco said. "As a first-generation born, I struggled with trying to figure out what personal finance and retirement planning look like in the U.S.," she said. There's also a lack of financial education in the school system, as well as a lack of personal-finance content specifically in Spanish, she added.

The generations can also help one another, Francisco said. Older generations may not feel comfortable putting their money in anything other than a basic savings account, but younger generations willing to try other accounts could help, such as by using a high-yield savings account and then showing the results to their skeptical relatives.

Seeing the interest accrued and money made without an extra job or more physical hours working could make a difference, Francisco said. "Results are the biggest way to change someone's mind," she said.

-Alessandra Malito

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10-04-23 1030ET

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