Are immigrants the frugal retirees par excellence?
Bo Thao-Urabe came to the United States in December 1979, aged 6, after her Hmong family fled Laos and spent three years in a refugee camp in Thailand. His family first settled in Chicago and eventually moved to Minnesota via Wisconsin. When she started her career after graduating from college, she knew that a portion of every paycheck would go towards supporting her parents.
“One of the things I learned about financial literacy was to put money aside first,” says Thao-Urabe, now founder and network director of the Coalition of Asian American Leaders (CAAL ) in St. Paul, Minnesota, an organization that taps into the collective power of Asian American leaders to better the community. “I understand the concept. But I usually think of my mom or dad or sister or people who aren’t in the same place as me and support them first, make sure they’re okay before I think about investing only in me.
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We know that America’s population is aging, and worries about retirement security – and insecurity – are high on the household agenda. What is less appreciated is that America’s foreign-born population is also aging. Immigrants 65 and older make up nearly 14% of the total US population and that figure is expected to rise to 21% by 2040, estimates the Census Bureau.
America’s older immigrant population is highly diverse by a number of measures. Some older immigrants are doing well financially, perhaps because they started a successful business or worked in companies with benefits. But many aging immigrants find themselves with little after working in physically demanding jobs with low wages and no benefits.
“This population is not on anyone’s agenda,” says Mary Lopez, an economist at Occidental College. “Nobody cares about immigrants’ retirement decisions.”
We should care, of course. But the rest of society has a lot to learn from immigrants about how to meet the challenges of retirement, especially those with little or no savings. Low-income immigrants are often creative and cooperative with their finances. “Despite enormous obstacles, marginalized people are finding ways to manage their financial needs and obligations,” writes Jose Quinonez, founder and CEO of the nonprofit Mission Asset Fund in San Francisco and 2016 MacArthur Scholar.
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Consider the dominant messages in the mainstream retirement literature. The basic approach focuses on what you can do as an individual. But relatively few people end up with savings in retirement, even those who benefit from an employer savings plan. It’s hard to save while raising kids, paying for college, coping with periods of unemployment and other challenges. Yet, it is largely an individual’s obligation to prepare for retirement.
“In the United States, you are responsible for your own retirement security,” says Christian Gonsalez-Rivera, director of strategic policy initiatives at the Brookdale Center for Healthy Aging at Hunter College in New York.
In contrast, the personal finances of many immigrants, especially those with low incomes, begin with family, extended family, neighborhood and community. Financial goals are achieved through collaboration, sharing and pooling of resources, including finding a measure of financial stability during the retirement years. “A collectivist approach is often attributed to culture,” says Gonsalez-Rivera. “There is some truth in that. But much more is economic security.
What could be the key lessons to take into account? And the multigenerational house? More than 20% of the US population lived with parents, grandparents, grandchildren and other family members in 2016, up from 12% in 1980, according to the Pew Research Center. A major factor in the resurgence is that foreign-born Americans are more likely than those born in the United States to live with multiple generations under one roof. “Many older immigrants live with an extended family and receive food and a roof over their heads,” says Gonsalez-Rivera.
The multigenerational home is a financially efficient arrangement. For example, the older generation may take care of the children while the young adults focus on building their careers. Older adults can manage a side business from home. The benefits extend far beyond the financial aspects. “The value of elders is to pass on knowledge,” says Thao-Urabe. “Stories, culture and being useful to the family.”
Older immigrants who are still working can participate in savings circles. Savings circles have different names, such as tandas (Mexico) and tontines (Cambodia and West Africa). They usually involve a group of people making regular small cash contributions into the savings pot. Members of the savings circle know each other and hold each other accountable. Payments can go to everything from medical bills to car repairs. Simply put, a group of people come together to mutually solve economic problems.
“They help each other,” says Jeffrey Ashe, assistant professor of international and public affairs at Columbia University and director of community finance at Oxfam America. “They take care of business and they take care of each other.”
Finally, one of the best ways to boost economic security is to work longer, although for health reasons this is not always a realistic option. One of the benefits of working longer is that it becomes easier to delay filing for Social Security. The benefit is potentially 76% higher if the worker can wait until age 70 to apply, compared to age 62, which is the earliest age to start receiving benefits. Older immigrants work longer on average than their native-born counterparts for a variety of reasons. Whatever the motive, the gist of a 2019 scholarly study by Occidental’s Lopez and Sita Slavov, a professor at George Mason University’s Schar School of Policy and Government, is that immigrants are “much less more likely than natives to retire in their late 50s and early 60s and claim social security before full retirement age.
None of these lessons should minimize the difficulties faced by so many immigrant seniors. But the proven approach of pooling resources to improve financial results is something the rest of us should keep in mind when planning for retirement.