House Votes to Strip Retirement Savings from Millions of Americans

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Hardworking Latinos took another hit from the Republican-led Congress this week when the House of Representatives voted to overturn Department of Labor regulations that support state efforts to provide retirement programs to private sector workers.

“We are disappointed that members of Congress have voted against the financial security of millions of Americans. In California alone, the Secure Choice program that was voted into law last year with bipartisan support would help connect 7.5 million workers—half of whom are Latino—to a retirement savings account,” said Eric Rodriguez, NCLR’s Vice President of the Office of Research, Advocacy, and Legislation.

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New DOL Regulation Will Help Savers Protect Themselves

Senior woman cookingIf you are saving for retirement or plan to do so in the future, a new regulation will help protect your hard-earned savings!

On Wednesday, the Department of Labor updated the definition of retirement investment advice and closed loopholes that permit some retirement investors to steer clients into investment products that aren’t in their best interest. Now, anyone offering individualized retirement investment advice must act under a fiduciary standard, meaning they must provide impartial advice in their client’s best interest. It is good news for Latinos and other small savers, as they are least able to absorb the shock of increased fees and decreased returns often seen with conflicted retirement investment advice.

Many Americans struggle to save enough for retirement. Latinos have the smallest retirement account balances of any group and often lack access to employer-sponsored retirement savings plans. They are also much younger than the general population, and as more enter the workforce—expected to comprise 18.6% of the labor force by 2020—it is essential that the retirement savings environment ensures the security of their nest egg and minimizes retirement account losses due to high fees and low returns on investments.

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Take a Step Toward a More Secure Financial Future with myRA

If you don’t have access to a retirement savings plan at work, you’re not alone. According to a new report from the Pew Charitable Trusts, more than 30 million full-time employees in the United States are in the same situation.

Research shows that the Hispanic population has been particularly affected by the retirement savings crisis. According to Pew, 62 percent of Hispanic workers don’t have access to retirement savings plans through their employers, compared to 37 percent of White non-Hispanic workers.

Lack of access to a workplace savings plan isn’t the only barrier to saving. High fees, complicated investment options, and fear of losing money can also get in the way.

To help address the retirement savings crisis in America and make it easy for people to start saving, the U.S. Department of the Treasury developed myRA®. This new retirement savings account costs nothing to open, has no fees, and carries no risk of losing money. It was designed for people who don’t have access to a retirement savings plan through work and are looking for a simple, safe, and affordable way to start saving for the future.

“It is important for me because it’s my future.”

myRA_pic1Mariela Ortiz is an employee at Coral Gables La Salle Cleaners near Miami. She came to the United States from Cuba 15 years ago and has worked multiple jobs over the years to support her two sons.

Mariela has been thinking about saving for a long time, but getting started has been difficult since she doesn’t have access to a workplace-sponsored plan. She decided to open a myRA account after her human resources manager told her about the program. With the help of Spanish-speaking myRA representatives, the process to open an account was easy.

Since opening an account, Mariela has been saving a small amount from her paycheck each week. She finds comfort in knowing myRA is backed by the U.S. Treasury, that accounts won’t lose money, and that she’s taking steps to save for retirement. “It is important for me because it’s my future,” she says.

America Saves Week is the perfect time to start saving

 America Saves Week (February 22–27) is a great time to start thinking about your financial future by taking the myRA 10-5-1 Retirement Savings Challenge. It’s simple:

  • 10 minutes: That’s how long it takes to open a myRA account online at myRA.gov. To make sure the sign-up process goes smoothly, have your social security number, driver’s license or other ID, and the name and birthdate of at least one beneficiary on hand.
  • $5 per pay period: Deposit at least $5 per paycheck into the account. It’s a small amount, but it adds up. You can contribute to your myRA account via direct deposit through your employer or from your personal checking or savings account. Consider setting up regular contributions; they make saving automatic, so you can set them up and then forget about them.
  • 1 step in the right direction: That’s it! You’ve taken the first step toward a better financial future, and your retirement savings account is ready to continue growing. Down the line, you can boost your savings by increasing the amount you save from each paycheck or by making one-time contributions, like from your federal tax refund.

During America Saves Week, take control of your financial future with myRA. To learn more, visit myRA.gov.

From Conflict of Interest to Best Interest

By Amelia Collins, Legislative Fellow, NCLR

AgingLGBT_blogpic_4Thirty-eight million working-age households have nothing saved for retirement.

This retirement savings deficit is worse for communities of color, with 62 percent of Black and 69 percent of Hispanic households with no money in a retirement account. For those who do save, their account balances are disproportionately low: three in four Black households and four in five Latino households aged 25–64 have less than $10,000 in retirement savings, compared to one in two White households.

With too many Americans already struggling to save enough for retirement, any loss in retirement funds jeopardizes retirees’ financial security. One of the biggest drains on retirement savings is “conflicted advice.” Conflicted advice occurs when those giving advice can steer clients into higher-cost products to boost their own bottom line, even if those products aren’t the best for the client’s savings. Unfortunately, current regulations allow many who market themselves as financial advisers to make these conflicted recommendations. Back in April the Department of Labor (DOL) proposed an update to prevent conflicted advice on retirement investments. The proposed rule would ensure anyone providing investment advice for a fee—whether a registered investment advisor or a broker—will suggest products that are in the best interest of their client.

The DOL regulation would also strengthen the financial security of Hispanics, who are already disadvantaged in the retirement space. Barriers already prevent Latinos from saving enough for retirement, making it all the more imperative that the advice they receive helps them improve savings and bolster account balances.

Workers of color have less access to retirement savings vehicles compared to Whites: 38 percent of Latino employees, 54 percent of Black employees, and 54 percent of Asian employees aged 25–64 work for an employer that sponsors a retirement plan, compared to 62 percent of White employees.

Further, as Latinos tend to have lower balances in their retirement accounts, higher fees represent a higher proportion of their retirement savings absorbed by advisers and financial institutions. This makes Latinos even more vulnerable to financial instability. Quality standards for advice provided for a fee are especially important to Latino and other low-income consumers to ensure the advice they receive is truly in their best interest.

As part of the regulation process, the DOL asked groups for their input on the proposal. NCLR weighed in this week in support of the proposed rule and applauds the department’s commitment to a strong, workable rule. This Tuesday, the Senate Committee on Health, Education, Labor, and Pensions Subcommittee on Employment and Workplace Safety held a hearing on the proposal. Department of Labor Secretary Thomas Perez defended the rule, saying “as long as we don’t lose sight of the North Star—an enforceable best-interests commitment—we are very flexible on the question of how to get this work done.”

It Pays to Wait

To truly get the most out of your retirement benefits, consider waiting until you’ve reached the age where you can fully maximize your monthly payment. Take a look at our graphic below to better understand why waiting is the best thing you can do for your future. Go to nclr.us/ItPaysToWait to download our report on how to maximize your Social Security benefits. It pays to wait.

Decisions,decisionsFinal