Latinos are the fastest-growing segment of the U.S. workforce but are also among the least inclined to take advantage of employer-sponsored retirement plans, and that poses problems for plan providers.
The demographics say the Latino 401(k) market should be big business for plan providers. Yet the Latino population remains elusive, sitting on the sidelines more than whites or Asians when such plans are offered, and dipping into their 401(k) for loans, which significantly reduces their retirement savings.
"Latinos are a key part of our work force, but most have had little opportunity to save for the future," said Eric Rodriguez, a vice president in the Office of Research, Advocacy and Legislation at the
Latinos make up 14% of the U.S. workforce and are projected to be one-third of it by 2050, according to "Insecure Retirements: Latino Participation in 401(k) Plans," a report the council released last week. The report also shows that when employees are automatically enrolled, their savings rates jump from 20% to 80%.
But auto-enrollment has its limitations.
It works only when the participants view the plan as aligned with their own goals, said David Wray, president of the
When participants do not understand why they should enroll, or in some cases don't even know they are enrolled in retirement savings plans, inefficiencies and expense can result. Wray uses the example of
To get higher participation and savings rates, companies should be communicating with employees in their own language, Wray explained. One-on-one counseling is another effective way to enroll more Latino and low-income participants. The problem is that for a lot of companies it is not practical to meet face to face with potential participants because of the cost and the time, especially for companies with multiple locations.
"If anyone is poised to capitalize on the Latino 401(k) marketplace, it's the insurance companies," said Mike Alfred, the chief executive of
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