1

STATEMENT OF: 

ARNOLDO MATA 

ON BEHALF OF: 

THE HISPANIC INSTITUTE 

AMERICANS FOR SECURE RETIREMENT 

TO THE: 

U.S. DEPARTMENT OF LABOR 

U.S. DEPARTMENT OF TREASURY 

Joint Hearing on Lifetime Income Options for Retirement Plans 

September 14, 2010 
2

Executive Summary 

Many policymakers and experts are looking at the issue of retirement security with increasing 

concern. As 77 million Baby Boomers begin to enter their retirement years, the nation is facing 

an unprecedented time of economic volatility. Traditional sources of retirement income – 

pensions, Social Security, and employer-based plans – will not be enough for many Americans to 

provide for themselves and their loved ones during their retirement years. Longer life spans, 

historically low savings rates and shifting work patterns in the economy have changed traditional 

approaches to retirement. In addition, recent market volatility has brought renewed attention to 

the importance not only of the accumulation of retirement savings, but also the management of 

these assets. As a result of market downturns, more Americans will have to do more with less, 

and pay close attention to making their savings last throughout their retirement years. 

Hispanics in the United States face an especially difficult challenge in maintaining their standard 

of living throughout their retirement. This is due to several factors. On average, Hispanics in the 

U.S. today have lower levels of educational attainment, less earning power, and a lower level of 

savings than non-Hispanics. Hispanics in the United States are less likely than non-Hispanics to 

have an employer-sponsored retirement plan, which puts them at a disadvantage for 

accumulating retirement income. In addition, many Hispanics work in service jobs or small 

businesses that do not provide retirement plan options to their employees. Compounding these 

trends is the fact that many Hispanics in America today lack the financial literacy necessary for 

sound retirement planning. 

Although Hispanics share a common language, they are a diverse group with distinct cultures 

and unique circumstances. Hispanics represent a wide range of educational attainment, 

occupations and income levels. Many families can trace their heritage to the continental United 

States, while others are recent immigrants with limited work experience and a lack of savings or 

access to retirement savings vehicles. All of these factors greatly impact how effectively 

Hispanics are able to provide for their retirement needs. 

There are actions that can help Hispanics better prepare for retirement. Increased access to 

retirement savings vehicles that provide a steady stream of reliable income during retirement is 

vital if Hispanics are to provide for themselves and their families during their golden years. In 

addition, employer-based financial education will make it easier for Hispanics to better connect 

their current income to their future retirement. The development of employee awareness 

programs that encourage Hispanics to develop savings habits that direct money toward long-term 

goals is also important. And finally, helping Hispanics learn to use tools that will both encourage 

them to accumulate and invest for retirement, and help them better manage that money during 

their retirement years. 

Indeed, members of the Hispanic community will increasingly need to look for a variety of 

solutions to ensure a comfortable retirement. Education, diversification of employers, access to 

retirement planning vehicles and increased retirement savings will all play an important role in 

this critical national challenge. Moreover, because of the great challenges Hispanics face in 

accumulating savings due to lower incomes, lower participation in employment-sponsored 
3

retirement plans, and lower overall savings rates, it is all the more important that their savings 

are managed and invested in a manner that will assure income that will last throughout their 

retirement years. 

Statement 

I am Arnoldo Mata, Director of Research at The Hispanic Institute, a nonprofit organization 

committed to providing an effective educational forum for an informed and empowered Hispanic 

America. On behalf of The Hispanic Institute, I am grateful for the opportunity to submit 

testimony for this joint hearing on Lifetime Income Options for Retirement Plans. 

The Obama Administration and the Departments of Treasury and Labor (the “Agencies”) should 

be commended for working to address the increasingly difficult retirement challenge facing 

Americans. The Hispanic Institute strongly supports encouraging and providing incentives for 

Americans to secure a steady stream of guaranteed income in retirement. 

In 2009, I was the author of a report entitled “Hispanics and Retirement: Challenges and 

Opportunities,” which was commissioned on behalf of Americans for Secure Retirement (ASR), 

a broad-based coalition of 70 member and affiliate organizations – of which The Hispanic 

Institute is a member - committed raising awareness of the difficult challenges Americans face to 

enjoy a secure retirement. 

Our two organizations authored this report to empirically demonstrate that Hispanic Americans 

face greater challenges in obtaining a secure retirement than the average population, including a 

general lack of retirement preparation, less access to employer-sponsored retirement plans, lower 

levels of personal savings and inadequate financial literacy. What follows is a summary of what 

we found, an assessment of the state of retirement for Hispanics, as well as a number of 

recommendations that will encourage lifetime income for Hispanics. 

HISPANICS AND RETIREMENT: CHALLENGES AND OPPORTUNITIES 

Many policymakers and experts are looking at the issue of retirement security with increasing 

concern. As 77 million Baby Boomers begin to enter their retirement years, the nation is facing 

an unprecedented time of economic volatility. Traditional sources of retirement income – 

pensions, Social Security, and employer-based plans – will not be enough for many Americans to 

provide for themselves and their loved ones during their retirement years. Longer life spans, 

historically low savings rates and shifting work patterns in the economy have changed traditional 

approaches to retirement. In addition, recent market volatility has brought renewed attention to 

the importance not only of the accumulation of retirement savings, but also the management of 

these assets. As a result of market downturns, more Americans will have to do more with less, 

and pay close attention to making their savings last throughout their retirement years. 

Hispanics in the United States face an especially difficult challenge in maintaining their standard 

of living throughout their retirement. This is due to several factors. On average, Hispanics in the 

U.S. today have lower levels of educational attainment, less earning power, and a lower level of 

savings than non-Hispanics. Hispanics in the United States are less likely than non-Hispanics to 

have an employer-sponsored retirement plan, which puts them at a disadvantage for 

accumulating retirement income. In addition, many Hispanics work in service jobs or small 
4

businesses that do not provide retirement plan options to their employees. Compounding these 

trends is the fact that many Hispanics in America today lack the financial literacy necessary for 

sound retirement planning. 

Although Hispanics share a common language, they are a diverse group with distinct cultures 

and unique circumstances. Hispanics represent a wide range of educational attainment, 

occupations and income levels. Many families can trace their heritage to the continental United 

States, while others are recent immigrants with limited work experience and a lack of savings or 

access to retirement savings vehicles. All of these factors greatly impact how effectively 

Hispanics are able to provide for their retirement needs. 

Hispanics in the U.S. – a growing demographic 

There are more than 48 million Hispanics in the United States, with approximately 75 percent 

concentrated in seven states: California, Texas, Florida, New York, Illinois, Arizona and New 

Jersey.1

 U.S. Census Bureau projections indicate that there will be 132 million Hispanics in the 

U.S. by 2050, accounting for nearly 30 percent of the total U.S. population.2 

As a group, Hispanics are younger than the United States population overall. The median age for 

Hispanics is 27.3 years of age, compared to 39 years for non-Hispanic whites and 36.4 years for 

the U.S. as a whole.3 More than 25 percent of Americans are in their pre-retirement years (age 

45 to 64), compared to just 16 percent of the Hispanic population. The age gap widens for those 

who are already in their retirement years. More than 12 percent of the total U.S. population is 

aged 65 and older, while less than 6 percent of Hispanics fall into this range.4 

Demographics are important for retirement considerations in several respects. First, statistics 

indicate that Hispanics are likely to have a longer life expectancy than non-Hispanics. Hispanic 

men who were age 65 in 2005 can expect to live to age 85, compared to age 81 for American 

men overall. Hispanic women who were age 65 in 2005 can expect to live to age 88, compared 

to age 85 for all women.5 Because Hispanic Americans have a longer life expectancy, their 

retirement savings will need to last longer than many have predicted and thus may have a greater 

need for options to manage retirement assets. 

 

1

 2006 American Community Survey, U.S. Census Bureau. 

2

 U.S. Census Bureau, Projections of the Population by Sex, Race and Hispanic Origin for the United States: 2010 to 

2050 

3

 U.S. Census, 2006 American Community Survey 

4

 U.S. Census, 2006 American Community Survey 

5

 Social Security Administration, 2006. 
5

Secondly, Hispanics will comprise a substantial segment of future retirees. Hispanics today 

skew younger than the overall U.S. population, leaving more than 77 percent of U.S. Hispanics 

decades away from their retirement. With the U.S. Hispanic population projected to triple over 

the next 40 years, Hispanics will make up a significant number of those Americans entering 

retirement in the future. Today, public policy discussions center on the economic pressures of 

the Boomer generation. Iit is clear that the Hispanic demographic must be central to the debate, 

especially with respect to how aging Hispanics will provide for themselves and for their families 

during their retirement years. 

Education, Income and Occupational Trends 

The lower educational attainment of Hispanics in the U.S. creates challenges when it comes to 

saving for retirement, as lower educational attainment often correlates with lower income levels. 

Education 

Hispanics tend to have lower educational levels than the U.S. population overall. Almost one 

quarter of Hispanics over 25 years of age have less than a ninth grade education, compared to 

less than 7.41 percent of non-Hispanics in the U.S.6

 Hispanics also lag behind the general 

population in post-high school education levels. Only nine percent of Hispanics have a 

bachelor’s degree, compared to 17 percent of the U.S. population.7 

Income 

Educational attainment has a direct impact on the earning power of Hispanics in the U.S., and 

this educational differential is reflected in median household income levels. In 2006, the average 

per capita income for Hispanics was $14,736 compared to $25,267 for the general population 

and $27,951 for non-Hispanics.8 At the same time, however, numbers show an increasing 

number of middle-class Hispanics in the U.S. Between 1979 and 1999, middle-class Hispanic 

households increased nearly 80 percent.9 Hispanic households earning an annual income of 

$40,000 to $140,000 grew to include about one-third of total Hispanic households nationwide.10 

Slightly more than 20 percent of Hispanics live in poverty, compared to 13.3 percent for the 

general population.11 The percentage of Hispanics living in poverty is less than it was two 

 

6

 U.S. Census, 2006 American Community Survey 

7

 U.S. Census, 2006 American Community Survey 

8

 U.S. Census, 2006 American Community Survey 

9

 S. Trejo, Capps, R. and Tyler, M. “The Latino Middle Class: Myth, Reality, and Potential,” Tomás Rivera Policy 

Institute, 2001. 

10 Ibid. 

11 U.S. Census, 2006 American Community Survey 
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decades ago, but recent data indicate that poverty levels have increased somewhat since the year 

2000. In 1990, 25 percent of Hispanics were living in poverty, but by 2000, this number had 

dropped to 19.2 percent, an average decrease of 0.7 percent per year. From 2000 to 2006, the 

percent of Hispanics living in poverty increased, rising from 19.2 percent to 20.6 percent, an 

average annual increase of 0.2 percent.12 Lower income levels during working years means that 

there is less disposable income to save for retirement spending. 

A comparatively lower net worth also affects Hispanics’ capacity to prepare for retirement. The 

median net worth of Hispanic households in 2002 was $7,932 – slightly more than the median 

African-American household’s net worth at $5,988, yet just nine percent of $88,651, the median 

wealth of white non-Hispanic households in the U.S.13 

Due to statistically lower income and net worth, Hispanics typically have a lower retirement 

income than non-Hispanics. The mean annual income for non-Hispanic white retirees is 

$24,351, compared to $16,947 for Hispanics.14 Hispanics also spend a greater percentage of 

their retirement income on fixed costs and essential expenditures. On average, Hispanics spend 

more than half of their retirement income – 54.4 percent – on food and housing, compared to 

expenditures of just 11.4 percent for non-Hispanic white retirees.15 

Hispanic females face even greater challenges regarding the circumstances leading to their 

retirement. Sixty-three percent of Hispanic female retirees said they retired due to illness, 

disability, company closure or other reasons not of their choosing. This figure is almost twice as 

high as for the general population, 35 percent, and more than double the rates of AfricanAmerican and Asian-American women, 28 percent and 31 percent respectively (Source: 

Nationwide Financial study, 2007). These types of traumatic changes lead to drastic reductions 

in income for Hispanic females and put added pressure on what limited retirement income they 

may have accumulated. 

Occupational Trends and Impact on Retirement Savings 

Although Hispanics work in all sectors of the economy, they are more heavily concentrated in 

lower-paying blue collar jobs. Roughly two-thirds of Hispanics are employed in service-related 

jobs, while just 17 percent work in traditionally higher-paying jobs in the management sector and 

other traditional white-collar industries. 

The types of jobs Hispanics hold have an impact not only on their immediate income, but their 

retirement income as well. Hispanics, on average, have less access to employer-sponsored 

retirement plans and a decreased likelihood of participating in employer-based retirement 

benefits. Only 25.6 percent of Hispanics are covered by employer-sponsored retirement plans, 

 

12 U.S. Bureau of the Census, 2008 Statistical Abstract, Income, Expenditures, Poverty, and Wealth section 

13 Kochhar, Rakesh. “The Wealth of Hispanic Households: 1996-2002,” Pew Hispanic Center, 18 October 2004. 

14 U.S. Bureau of the Census, 2008 Statistical Abstract, Income, Expenditures, Poverty, and Wealth section 

15 Bureau of Labor Statistics, Monthly Labor Review, June 2003 
7

compared to 42.5 percent of whites and 40 percent of African-Americans.16 Overall, 60 percent 

of American workers have access to employment-based retirement benefits such as pensions and 

401(k) programs.17 Yet, U.S. Bureau of Labor Statistics data show that access to employmentbased retirement benefits is not uniform across industries. Although 73 percent of workers in 

goods-producing businesses, such as manufacturing and mining, have access to such benefits, 

only 56 percent of workers in service-producing businesses, such as retail sales and health care, 

have access to employer-sponsored retirement benefits. At the same time, 64 percent of the 

workers in goods-producing and 47 percent of workers in service-producing businesses 

participated in the retirement benefits program offered by their companies. More than 45 percent 

of Hispanics are employed in service industries, which traditionally pay less than other 

industries. This gives Hispanics less disposable income to invest in traditional retirement plans. 

Additionally, service industries are less likely to provide access to traditional retirement plans.18

Twenty-six percent of Hispanic workers participate in an employment-based retirement savings 

plan compared to 60 percent of Americans overall.19 Compounding this difference is the fact 

that the lower the income, the less likely Hispanics are to take part in employment-based 

retirement plans. More than 60 percent of Hispanics with an annual income of over $75,000 

participate in employer-sponsored retirement plans, compared to a mere six percent of Hispanics 

with incomes of less than $20,000.20 

Recent trends indicate that Hispanics have actually become less prepared for retirement over the 

past few years. Between 2002 and 2006, the share of Hispanics who participated in an 

employer-sponsored retirement plan in the private sector declined by an average annual rate of 

0.9 percent.21 

Other Issues 

Banked vs. Unbanked 

One challenge for Hispanics when saving for retirement is the lack of bank accounts for some, 

particularly those who are in the lower income brackets. According to the Federal Reserve 

Board, slightly more than nine percent of American families overall and approximately onequarter of Hispanics are among the “unbanked,” meaning those workers who do not have 

 

16 National Compensation Survey, U.S. Bureau of Labor Statistics, August 2006 

17 National Compensation Survey, U.S. Bureau of Labor Statistics, August 2006 

18 National Compensation Survey, U.S. Bureau of Labor Statistics, August 2006 

19 National Compensation Survey, U.S. Bureau of Labor Statistics, August 2006 

20 2007 Minority Retirement Confidence Survey, the Employee Retirement Benefit Research Institute. 

21 Current Population Survey data as analyzed in Purcell, Patrick. 2007. “Pension Sponsorship and Participation: 

Summary of Recent Trends.” Washington: Congressional Research Service. 
8

established bank accounts for a variety of reasons.22 The most common groups of unbanked 

individuals in the United States include those with low income and low education levels, 

households led by single females or young adults, those in rural communities, and recent 

immigrants. 

Generally speaking, the lower the income, the greater the likelihood that an individual will be 

unbanked. This is also true for the Hispanic demographic. More than 50 percent of unbanked 

Hispanics in the U.S. have an annual income of less than $15,000 a year, and 25 percent of 

unbanked Hispanics have an annual income of $15,000 to $30,000.23 Without access to bank 

accounts and related financial services, it is difficult for unbanked Hispanics to set up retirement 

savings tools and adequately plan for their retirement years. 

Health Care 

Health care issues also play an important role in when and how Hispanics retire. As previously 

noted, Hispanics tend to have longer life expectancies than the overall U.S. population.24 The 

combination of longer life spans and lower average retirement savings means Hispanics are less 

prepared for long-term medical needs. In 2006, more than a third of Hispanics (34.1 percent) 

were not covered by health insurance, compared to 15.8 percent of the general population.25 As 

a result, Hispanics may be more likely to delay retirement and continue working in order to have 

access to employer-based health insurance services or to generate sufficient income to pay for 

out-of-pocket medical expenses. Furthermore, managing limited retirement savings carefully 

over time takes on even greater importance.

Hispanics and Retirement Savings Vehicles 

Social Security, employer-based retirement plans, and personal savings represent the traditional 

three-legged stool of retirement savings for Americans. As this paper has noted, income, 

demographics, educational levels and occupational trends create significant obstacles for 

Hispanics when it comes to saving for retirement. These factors combine into greater difficulty 

in making ends meet once Hispanics enter their retirement years, especially during times of 

economic volatility. 

Since they have less access to, and participation in, employer-sponsored retirement plans, 

Hispanics are more dependent on Social Security for retirement income. Almost 75 percent of 

older Hispanics receive Social Security benefits, and Social Security represents the largest single 

source of retirement income for older Hispanics.26 Of those Hispanics age 65 or older receiving 

 

22 Survey of Consumer Finances, Federal Reserve Board, 2001. 

23 Survey of Consumer Finances, Federal Reserve Board, 2001. 

24 Social Security Administration, 2006 

25 U.S. Bureau of the Census, Historical Health Insurance Tables 

26 Research Report, AARP Public Policy Institute, 2007 
9

Social Security benefits, slightly less than 80 percent rely on these benefits for 50 percent or 

more of their income. Nearly 85 percent of older Hispanic females receive half or more of their 

income from Social Security benefits while more than 50 percent depend on the program for 100 

percent of their income.27 In addition, Hispanics are at a disadvantage when it comes to receiving 

Social Security benefits. Among persons age 65 and older, 76 percent of Hispanics receive 

Social Security benefits, compared to 91 percent of whites and 85 percent of AfricanAmericans.28 Additionally, among persons age 65 and older who receive Social Security 

benefits, Hispanics receive an average $8,497, compared to $10,621 for whites and $8,828 for 

African-Americans.29 

Hispanics are also at a disadvantage when it comes to employment-based retirement plans 

(qualified retirement plans). As noted previously, Hispanics are more likely to work for 

companies that do not offer employer-sponsored retirement plans such as pensions and 401(k) 

programs. Only 33.5 percent of employed Hispanics work for employers that sponsor a 

retirement plan, compared to 55.7 percent of whites and 51.6 percent of African-Americans, and 

only 25.3 percent of Hispanics participate in an employer-sponsored retirement plan, compared 

to 45.3 of whites and 39.3 percent of African-Americans.30 Only 29 percent of Hispanic wage 

and salary workers aged 29-64 participated in an employer-sponsored pension plan, compared to 

53 percent of white workers in the same wage and age brackets.31 Hispanics are less likely to 

participate in employer-sponsored retirement plans than whites in all wage and salary brackets 

ranging from less than $15,000 to more than $50,000. And, like other low-income employees, 

the on-average lower income of Hispanics means less disposable income and less money to set 

aside for retirement. 

The third major source of retirement income (personal savings and investments) plays a critical 

role for retirees. Given that Hispanics are less likely to participate in employer-based retirement 

plans, and given the lower income they can expect from Social Security, Hispanics must take an 

active role in developing their personal savings and investments in order to have a financially 

secure retirement. 

Yet, savings levels indicate that Hispanics are less prepared than their non-Hispanic counterparts, 

and that personal savings have actually decreased over the past few years. The personal savings 

rate (the percent of after-tax income left after household bills are paid) has dropped from a peak 

of 15 percent in 1975 to a negative rate in 2002 and 2006; however, the rate has slowly increased 

to slightly above one percent.32 More than half of Hispanics have less than $10,000 total saved 

 

27 Research Report, AARP Public Policy Institute, 2007 

28 Hispanics and the Social Security Debate, Pew Hispanic Center, March 2005 

29 EBRI Issue Brief No. 332, Employee Benefit Research Institute, October 2008 

30 Hispanics and the Social Security Debate, Pew Hispanic Center, March 2005 

31 Retirement Security for Latinos, National Council of La Raza, July 2005 

32 Federal Reserve Bank of St. Louis Review, November/December 2007 
10

for retirement.33 The figures for those who do have employer-sponsored plans are also troubling. 

Just 20 percent of Hispanics with an employer-based retirement vehicle have funds saved outside 

of their employer’s plan, compared to 32 percent of all workers.34 Further, Hispanic retirement 

savings rates are falling, placing future retirement preparedness in jeopardy. In 2007, 41 percent 

of Hispanic workers say they have saved money for retirement (outside of their work or 

otherwise), compared to 60 percent in 2003.35 

A lack of financial planning further compounds the challenges Hispanics face when it comes to 

saving for their retirement. Less than one-quarter of Hispanic workers have calculated how 

much money they will need to save for a comfortable retirement, compared to 42 percent of nonHispanics.36 When asked, half of Hispanics said that they need more information to help them 

plan their retirement.37 Only 25 percent of Hispanics said they learned about retirement planning 

from a financial institution, and 64 percent said they learned on their own.38 

Recommendations 

Hispanics face many challenges when it comes to saving for retirement. Longer life spans 

combined with lower educational and income levels, less access to employer-sponsored 

retirement plans, lower levels of personal savings and less financial literacy all contribute to the 

lack of retirement preparedness. There are actions private and public employers can take to help 

Hispanics better prepare for retirement. The Agencies should encourage employers to provide 

the following option: 

 Provide access to retirement savings vehicles that provide a steady stream of reliable 

income during retirement is vital if Hispanics are to provide for themselves and their 

families during their golden years. 

 Provide employer-based financial education to make it easier for Hispanics to better 

connect their current income to their future retirement. 

 Develop employee awareness programs that encourage Hispanics to develop savings 

habits that direct money toward long-term goals. 

 Work their human resource to help Hispanics learn to use tools that will both encourage 

them to accumulate and invest for retirement, and help them better manage that money 

during their retirement years. 

 

33 2007 Minority Retirement Confidence Survey, the Employee Retirement Benefit Research Institute 

34 2007 Retirement Confidence Survey, the Employee Benefit Research Institute 

35 2007 Minority Retirement Confidence Survey, the Employee Retirement Benefit Research Institute 

36 Issue Brief No. 292, the Employee Retirement Benefit Research Institute, April 2006 

37 Hispanic Retirement Study: Financial Matter, AARP, March 2007 

38 Hispanic Retirement Study: Financial Matter, AARP, March 2007 
11

There are other key policies that can make it easier for Hispanics to develop their retirement 

resources. 

Lifetime annuities are a type of financial product that is designed to provide a continuous stream 

of income during retirement. When used in conjunction with income from employer-based 

retirement plans, Social Security benefits and personal savings, annuities can provide Hispanics 

the necessary income to cover basic living expenses. Because annuities are a form of insurance, 

annuities combine, or pool, the risks of large groups of people and provide individuals a means 

to both accumulate retirement savings and guarantee income that will last as long as they live. 

Given the decreased likelihood that Hispanic workers will gain access to retirement vehicles 

through employers, it is important for policy makers to consider savings vehicles and incentives 

beyond those tied to employers. This policy view was reflected in the 110th Congress when 

many bills, including the Retirement Security for Life Act, sought to encourage savings and 

guaranteed retirement income by creating tax incentives for personal savings vehicles not 

associated with employers. This diversity of approach can benefit Hispanics and other groups 

that are at a disadvantage when it comes to preparing for a secure retirement. 

Members of the Hispanic community will increasingly need to look for a variety of solutions to 

ensure a comfortable retirement. Education, diversification of employers, access to retirement 

planning vehicles and increased retirement savings will all play an important role in this critical 

national challenge. Moreover, because of the great challenges Hispanics face in accumulating 

savings due to lower incomes, lower participation in employment-sponsored retirement plans, 

and lower overall savings rates, it is all the more important that their savings are managed and 

invested in a manner that will assure income that will last throughout their retirement years.