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Visualizing Retirement

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It has always been difficult to delay immediate gratification in order to receive either a prize or a larger benefit as the result of this effort. Saving for retirement is difficult and falls under this description; we save today in order to spend tomorrow. But it is many times more difficult to delay gratification if the future benefit can not be clearly visualized. This is one of the reasons behind the difficulty that many Hispanics have in preparing for retirement. 

Let’s attempt to visualize retirement for most Hispanics;

In many occasions retirement is described as a period of enjoyment or well deserved rest after many years of work. The enjoyment of these years is supported by income that is supposed to be produced by the combination of three sources; a Social Security pension, the income that comes from a employer-sponsored retirement plan, and investment income, that results after years of personal savings. 

Investment income at retirement rarely exists for Hispanics. Hispanics on average receive lower incomes than white Americans during their working years and their capacity to save for retirement is very limited. A similar argument can be made in the case of African-Americans. For many, visualizing this stream of income at retirement is impossible. 

Only a fraction of Hispanics (28% according to a survey conducted by Hispanic Wealth) are covered by employer-sponsored pension plans. According to the Center for Retirement Research, "They are less likely to have the kinds of jobs in which participation in a 401(k) plan is possible". We agree with the NCLR when they state that "This lack of access has far greater impact on retirement security than the nuances of 401(k) plan design, trends or employee behavior". Participation in a plan at a point in time does not imply that Hispanics accumulate large benefits, as turnover is frequent along their working  carriers, For those that have access to an employer-sponsored plan, participation is low. Visualizing the income produced by the company pension is something that just a fraction of Hispanics can do.   

Can we visualize Social Security? Well, sort of. In the most recent Social Security Statement, one can read…"Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 77 cents for each dollar of scheduled benefits". How much will the payment be in 2040? we can only guess, but if we think about our demographic pyramid , it can only get worst. With this statement, Social Security is telling us that our benefits are not secure, which goes counter to the idea of delayed gratification. Visualizing this benefit gets fuzzy, at best.          

There is one more hurdle. As human beings, our psychology contributes to the complexity of the visualization problem, consider that  “Old age, of all realities, is perhaps that of which we retain a purely abstract notion for the longest time”, -Marcel Proust’s Time Regained

The capacity to visualize retirement as well as the sources of income upon which we will live this time is an important step in building the motivation needed to delay gratification and taking responsibility for our own future. Culture plays an important role in this exercise.

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Hispanic Wealth’s focus is to improve the economic well-being of Hispanics living in the U.S.