Washington, DC – Today, The Retirement Security Project (RSP) and the National Council of La Raza (NCLR) released a new study showing that Latinos stand to gain significantly from common-sense improvements to retirement savings plans. Steps such as automatic enrollment in 401(k) plans, expanding the Saver’s Credit, updating the rules for how retirement accounts are handled in means-tested programs, and implementing targeted financial counseling for retirement savings would substantially improve retirement security for Latino workers. Rep. Mario Diaz-Balart (R-FL) and Rep. Xavier Becerra (D-CA) were joined by David John of The Heritage Foundation to confirm their support for the evidence-based policy solutions set forth in the report.

The report, Retirement Security for Latinos: Bolstering Coverage, Savings and Adequacy, shows that while Hispanic participation in employer-based 401(k) plans is half that of the general population and the average balance in those accounts is less than one-fifth that of the overall workforce (an average of $10,480 for Hispanics versus $53,670 for the population as a whole), a growing body of empirical evidence points the way to a solution. For example, among Hispanic new hires, automatic enrollment has been shown to increase 401(k) participation from 19% to 75%. (Under automatic enrollment, workers are enrolled in a 401(k) plan unless they opt out, as opposed to having to sign up for the plan in order to participate.) Even among Hispanic workers earning less than $20,000, automatic enrollment raised participation from 4% to 55%.

“We know what works to raise household savings: we need to make it easier and provide proper incentives. The evidence shows that common-sense steps to improve retirement security would be of particular benefit for Latinos, who unfortunately are often starting from a much lower savings rate,” said Peter Orszag, director of The Retirement Security Project.

As the report notes, many middle- and lower-income Latino households currently have little incentive to contribute to retirement accounts – and may actually be penalized if they do so. Policies like the Saver’s Credit, which was used by more than five million households in 2003, help to level the playing field for retirement savings incentives. The report calls for the Saver’s Credit to be expanded and strengthened, noting that because Latinos represent a disproportionate share of lower-income workers, they stand to benefit the most from such efforts. The report also highlights how outdated rules for determining eligibility for means-tested programs can impose substantial costs on those who save for retirement in 401(k) plans or IRAs, and argues that the Latino community would benefit from updating the rules to shield such retirement accounts from eligibility tests.

“Of the challenges facing the Latino community, retirement savings is one of the biggest. The combination of several factors regarding Hispanics – they have longer life expectancies, lower wages during their working years, and less savings in both private- and employer-based accounts – means we need to act now,” said Eric Rodriguez, the Director of the Policy Analysis Center at the National Council of La Raza. “The encouraging part is that some simple tweaks to the system, which have already garnered bipartisan support, can go a long way toward making things better. We can and should address this immediately.”

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The goal of The Retirement Security Project is to work on a nonpartisan basis to make it easier, and increase incentives, for middle- and lower-income workers to save. RSP is supported by The Pew Charitable Trusts in partnership with Georgetown University's Public Policy Institute and the Brookings Institution. www.retirementsecurityproject.org.

The National Council of La Raza is the largest national Hispanic civil rights and advocacy organization in the United States. NCLR receives support from the Ford Foundation for its work on asset-building initiatives. www.nclr.org.