Immigration, Retirement, And A New Middle Market Hiding In Plain Sight

The US Census recently released a report on the nation’s foreign-born population. The data indicate that between 2010 and 2022, the country’s foreign-born population increased by more than 15%. Making up nearly 14% of the nation’s total population, the foreign-born population totals more than 46 million people, an increase of six million since 2010.

Most, but not all, of these people will become part of a vast mass middle market of workers, consumers, and perhaps someday retirees. Some will struggle, while others are already more affluent or will become wealthy over time. However, what is clear is that nearly all of them will not share a common retirement heritage.

Retirement heritage is different from financial literacy which, simply put, is about how to manage your money. Budgeting, managing debt and spending, saving and investing, and planning for retirement are just a few elements of financial literacy.

So, what is retirement heritage? Heritage is something that is transmitted or acquired from a previous generation. Retirement heritage, however, includes the stories, goals, attitudes, and ultimately behaviors that we learn from others, typically our parents, that inform who and what we should trust, what we should do to prepare for and live in retirement, and what constitutes a successful or good retirement.

But who teaches us to retire if our heritage does not include retirement? How do we learn what we should and need to do for this mythical life stage? Retirement is not a natural force like gravity that is shared universally; it is a story that many, but not all, people subscribe to, and many in industrial economies have the opportunity to enjoy.

Retirement and the related financial planning and products offered by employers and financial professionals often assume that the employee or client knows what retirement is and what they will do in life after work, understands and trusts the underlying financial system, trusts employers and financial companies, and has some basic idea of how, and that they should plan and save. Not so.

Even native-born Americans do not necessarily have a robust retirement heritage. I am a first-generation college graduate and a first-generation retiree. My parents did not retire. There are many of us. Even those who did have parents who classically retired, their parents may have enjoyed the benefits of a guaranteed and robust pension, making their retirement far different from those who participate in defined contribution plans. For those of us who are new to retirement, we rely upon imagery and ideas found in brochures, media, the web, and employer-provided retirement seminars to inform us about what comes next if we choose to stop working in older age. Some, but far from the majority, of us have the added advantage of a financial professional to help navigate retirement planning and living.

According to Phil Eckman, president of Workplace Solutions at Transamerica, “Financial literacy is a foundational skill, yet it often overlooks the nuanced understandings of retirement shaped by cultural backgrounds.” He notes, “With a significant portion of the workforce lacking a traditional retirement heritage, there is a growing need for tailored financial planning that respects and integrates these diverse perspectives, ultimately guiding individuals towards a successful and secure retirement.”

Indeed, the growing population of foreign-born people has a diverse set of ideas about life in older age. Many have no retirement heritage at all, or at least one that differs from what is offered by the retirement industry in the United States.

In my recent paper published in the Investments & Wealth Monitor,“Preparing for the New Average: The Changing Face of Tomorrow’s Financial Services Client,” I cite how changing demographics will add new opportunities for financial services but will compel the industry and their employer plan sponsor partners to provide significant opportunities to educate a fast-growing and highly diverse market.

For example, the two fastest-growing populations to come to the United States are Hispanic and Asian. However, to call either Hispanic or Asian one group would be an error of both culture and geography. Foreign-born Hispanics are far from universal in experience and culture. Today’s Hispanic population hails from 17 different countries. Likewise, newly arrived people from Asia come from more than two dozen nations with vastly different cultures, traditions, and experiences. Some of these nations have solid and stable institutions; in other instances, they may be countries that have or are undergoing tumultuous political and economic change. In nearly all cases, this new generation of employees, clients, and, perhaps one day, retirees will have very different levels of trust in financial institutions, the government, their employers, and markets.

Many foreign-born people will be self-employed upon arrival and for a lifetime, leading them to believe that the story of retirement is a narrative about someone else but not them. Others will come to the United States as affluent and highly educated professionals but unfamiliar with employer benefits or that they have enough wealth to engage and benefit from the services of a financial professional.

Transamerica’s Eckman observes, “The concept of ‘retirement heritage’ introduces a critical lens through which we can view the challenges and opportunities in retirement planning today. As the U.S. becomes increasingly diverse, the financial services industry must adapt by developing more culturally competent retirement education and solutions that cater to a broad spectrum of retirement traditions and expectations.”

The number of foreign-born people in the United States today is greater than the entire population of Canada. It is a vast new market hiding in plain sight for financial services companies, employers, and financial professionals to discover, “What’s your retirement heritage? And to educate, engage, and prepare a new generation of Americans to live longer, better, financially secure lives across the lifespan.

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