Retirement Planning for Hispanics/ March 15th, 2019
I often help Hispanic members at the credit union I work for. When we talk about retirement planning, most of them say they don’t think that far ahead. Instead, they are focused on their current financial situation; thinking about what will happen at retirement age makes no sense now. I tell them they must think about how they will pay for expenses once they stop working. Retirement could become a real challenge if they aren’t prepared.
In order to successfully plan for retirement, individuals should take advantage of the existing retirement programs available to them. For example, if someone is employed at a company with an employer-sponsored plan, such as a 401(k) plan, they should participate in it. If possible, they should contribute the maximum amount of money the employer can match. For example, if you contribute up to 4 percent every paycheck, the employer will match it, meaning that your 401(k) account will end up getting 8 percent per paycheck. That additional contribution from your employer is basically free money. Wouldn’t you like that?
If your employer does not offer the 401(k) plan, you can open an Individual Retirement Account (IRA) with your credit union. There are two types of common IRAs: a Roth IRA and a traditional IRA. If you are starting early to save for retirement and you expect your income to increase over time, then a Roth IRA is recommended. This is funded with after-tax dollars, but at retirement age, when you start withdrawing money from this account, you won’t have to pay taxes on it. A traditional IRA is good for people who are expecting their income to decrease nearer to their retirement age. Your contributions are made with pre-tax dollars (you avoid taxes when you contribute), but you get taxed when you withdraw the funds. Individuals can contribute up to $6,000 towards an IRA per year.
Most brokerage firms require individuals to have a Social Security number and legal status in order to qualify for a retirement plan. So, what options are available to undocumented members? Although options are limited, here are some suggestions:
1. Set up a spending plan.
2. Automatically transfer an amount every month to your savings account.
3. Make sure that you have a strong credit report.
4. A broker may be able to set up a retirement plan for you, but first try at your local credit union.
As you see, there are multiple ways for you to start planning for retirement. The most important action to take is to plan early. If you are struggling with your current expenses, create a budget, work on your credit rating, and most importantly, work with a Financial Planner/Advisor who can guide you to successfully plan for retirement.