The Principal has launched a new education effort to reach out to Hispanic participants in retirement plans who are struggling to save. Principal noted that for these workers, language isn’t the only barrier. There are cultural differences that prevent Hispanic workers from contributing to their retirement accounts at the same rate as other workers.
“Our research found that simply translating materials to Spanish without considering overall cultural views falls short in encouraging U.S. Hispanic workers to save for retirement,” Greg Burrows, senior vice president of The Principal, said in a statement. “Retirement plans are not universally appealing to all groups. This new program takes a holistic approach, recognizing that an employer-sponsored plan may be a new concept depending on the level of acculturation of the workforce, and incorporating culturally appropriate retirement education services.”
The Principal pointed to research from the Employee Benefit Research Institute that shows Hispanic workers born outside the United States have the lowest rate of participation in retirement plans across companies of all sizes, regardless of income or age. EBRI found 70% of white workers and 69% of black workers with more than $50,000 in income are participating in their employer-sponsored plan, compared with 58% of Hispanic workers in the same income group.
Although those rates are low, The Principal found that compared to non-Hispanic workers, Hispanic employees were more likely to be saving outside their employer-sponsored plans.
As part of The Principal’s “Hispanic Market Program” initiative, the company released a white paper entitled “U.S. Hispanic Retirement Attitudes: How Cultural Influences Can Impact Retirement Savings.”
The key for advisors serving Hispanic plan participants, the report stated, is to help them become “acculturated.” The report broke the Hispanic market into three segments:
- Unacculturated workers are the 26% of Hispanic workers born outside the U.S. who either use Spanish exclusively while at home, or who use Spanish more than English. They tend to be between 35 and 49 and have been in the United States for an average 14 years.
- Partially acculturated workers represent 63% of Hispanic adults born in the United States or born elsewhere having lived in the U.S. for an average 18 years. About half consider themselves “Spanish-dominant,” while a third say they are bilingual.
- Mostly acculturated workers are primarily born in the United States and represent about 11% of Hispanic adults. Most say they are English-dominant and 22% call themselves bilingual.
The report noted that because Hispanic workers in the United States tend to be younger than retirement age, they are less exposed to retirement savings plans.
Hispanic workers tend to be more conservative, too. According to 2009 research from the Hispanic Institute and Americans for a Secure Retirement, Hispanic investors in the United States prefer to use easily liquidated, conservative savings products. Unacculturated Hispanic workers also tend to distrust politicians and institutions, making a government-regulated retirement plan less appealing.
The paper suggested advisors working with Hispanic workers focus on the cultural context of saving for retirement rather than simply providing translated materials.
In fact, simply translating materials can be treacherous. As an example, The Principal referred to its own tagline. “Our tagline at The Principal is ‘We’ll give you an edge.’ The literal translation into Spanish is ‘We give you a corner.’ That is not meaningful or reassuring, which is why we transcreated the tagline to read ‘Te damos la ventaja.’ This comes closer to what we intend to communicate: ‘We give you the advantage.’”
The Principal suggested Hispanic workers tend to be more receptive when advisors emphasize that setting up a retirement plan is not time consuming and that even small contributions can have an impact. They should also stress “do-it-for-me” types of investments like target-date funds that are appropriate for conservative investors.
“Hispanics are expected to account for 75% of the nation’s workforce growth in the next decade,” said Burrows. “Financial professionals have a significant opportunity to help employers meet the specific retirement needs of this younger, burgeoning demographic. Our program is a differentiator because it goes beyond language to address cultural influences.”
Check out 20-Somethings Want to Save, but Life Gets in the Way on ThinkAdvisor.