Latinx workers are one of the fastest-growing demographics in the US labor force today. However, according to a recent study by Morningstar, compared to other groups, Hispanic workers face major in allocating adequate retirement savings.
According to the report, only 31% of Hispanic households with income (defined as having at least one part-time job) are not currently participating in an employer retirement plan. This is in comparison to 51% of white households and 33% of Black households.
It is well established that Latinx households are lagging in savings and wealth accumulation. While income is a major driver of the wealth gap, there are other factors contributing to lower savings rates for these workers.
Compared to white households, Latinx households hold more of their wealth in automobiles (11% vs. 5%) and homes (48% vs 30%). Moreover, they hold less wealth in brokerage or other nonretirement investment accounts (5% vs 11%) or business (4% vs 7%).
Education is an important factor that increases the retirement savings rate for Latinx households. Latinx families where the head of household has a college degree have 1.1% higher retirement savings rates than those who didn’t finish high school, while the difference is only 0.3% in white households.
A significant contributing factor to the retirement savings disparity is the lack of access to employer savings plans. This may be driven in part by the size of the employer they work for. However, when plans are available, automatically enrolling participants can help offset the inequity.