March 16, 2005

Hispanics and the Social Security Debate

VI. Conclusions

Latinos have much at stake in any changes in the federal Social Security retirement system.

Today’s older Hispanics rely heavily on Social Security. More than 600,000 Hispanics age 65 or older are kept out of poverty by Social Security. Almost half of older Latinos receive more than 90 percent of their income from Social Security. Older Latinos have not accumulated the nest eggs that their white counterparts have been able to save. Nearly 80 percent of Hispanics age 65 or older over own no stocks and bonds whatsoever, compared with half of older whites.

Looking to the future, it is impossible to assess with confidence how Latinos will finance their retirements. On the one hand, there is a firm basis for projecting that today’s young Latinos will be better off in retirement than today’s older Hispanics. A greater share of young Hispanics were born in the United States, and a greater proportion of them spent their childhood here and were educated in the United States. With nativity comes enhanced educational attainment and eventually the potential for greater economic well-being. Under current law, the fact that more younger Latinos are native born would presumably boost the number of them who are covered by Social Security and the amount of Social Security retirement benefits they would receive. More of them would be eligible for Social Security retirement benefits when they reach age 62. In addition, their entire working years would be counted in determining their Social Security benefit levels. So, their ability to save out of their earnings may be greater and they will have higher Social Security benefits under current law. Young Latinos may have more extensive income sources to depend on in retirement relative to today’s older Hispanics. But young Latinos are clearly lagging young whites in developing private sources of retirement income. They are less likely to have private pension plans and their level of wealth accumulated trails far behind whites at any age.