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Hispanics retire with 70 percent less than whites

Wage gaps, limited availability of 401(k)s hinder wealth accumulation

Hispanics living in the U.S., particularly those who hail from other countries, are approaching retirement with less than a third of the savings of their white counterparts.

A new study from the Urban Institute, an economic policy think tank in Washington, found that the rapidly growing ethnic group is facing an uphill battle to accumulating sufficient funds for their later years.

Hispanics numbered 55.3 million in the U.S. in 2014 — 17 percent of the total U.S. population, according to Pew Research Center.

The Urban Institute's study, which used Census data, found a wide gap between Hispanics and whites when it comes to wealth at ages 65 and over.

In 2012, whites in that age group had median inflation-adjusted household wealth of $280,200, compared with $84,600 for U.S.-born Latinos and $30,900 for foreign-born Hispanics, according to the report. African-Americans fared better than Latinos from outside of the U.S., with a household wealth of $51,600.

Contributing to that result were earnings shortfalls and the lack of availability of retirement plans at the workplace. The effect is especially pronounced for Hispanics who are originally from outside the country.

"It's the case that when we have foreign-born populations, many of them came as adults and may not have spent the full 40 years working in the U.S.," said Stipica Mudrazija, a research associate at the Urban Institute and co-author of the report.

"They have less time to accumulate wealth," he said.

Lasting effects of inequity

The study found a sharp disparity in the incomes of Hispanics, African-Americans and whites. The difference is striking when accounting for foreign-born Hispanics. See the chart below.

Consider that in 1979, Latino men ages 25 to 64 and born outside the U.S. had median inflation-adjusted earnings of $35,900, according to the Urban Institute. That same year, white men in the same age group were making $58,700.

That gap remained in 2013, when Hispanic men had median inflation-adjusted earnings of $29,000, compared with white men's earnings of $54,500.

The differences were also stark when it came to which groups participated in a 401(k) plan.

Only 23 percent of foreign-born Hispanic men ages 25 to 64 were covered by a workplace plan in 2014, compared with more than half of white men.

"Ultimately, Hispanics — and foreign-born Hispanics in particular — are disproportionately concentrated in occupations that offer few work-related benefits," said Mudrazija.

"That's the main cause behind this difference," he said.

Gradual savings improvements

The institute is optimistic about the ability of Hispanics to save more over time, particularly as younger generations born in the U.S. age.

For instance, between 1979 and 2013, real median family income, adjusted for family size, grew 51 percent for Hispanics born in the U.S., according to the study.

The institute projects that this will lead to improved retirement income. Median family income at age 70 for U.S.-born Latinos will grow to $39,500 by 2040, compared with $26,900 for those who are currently in their 70s.

Improvements are also expected for older African-American households, whose median family income will reach $33,900 by 2040, up from $30,000 for those now in their 70s.

Hispanics who hail from outside the U.S. will also see a boost in their income as they age. (See below for details.)

Education is key to improving the outlook, as it opens doors to greater opportunities, including careers with stronger earnings prospects and retirement plan availability, Mudrazija said.

"Educational attainment is a major point of distinction, and over time we see that each successive generation is better educated," he said.

"We see that based on these strengths, minorities, including U.S. and foreign-born Hispanics, will experience an increase in income and wealth in the years to come."