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Hispanics' Lack of Savings Could Spark Crisis

Stocks in this article: BAC C TROW

This coming influx of ill-prepared retirees is likely to live longer. Hispanic men who were 65 in 2005 are expected to live to 85, compared to 81 for American men overall. Hispanic women are projected to live to 88, compared to 85 for all women in the U.S.

The impact of these converging issues may not reach crisis levels until 2050, when the bulk of working-age Hispanics hit retirement. But it's still a cause for concern now.

"If they don't have the savings and the support they need, you are going to have a lot of people retiring into poverty," says Arnoldo Mata, the study's author. "Either we address some of those issues now, through education and regulatory reform, and we allow them to prepare for it or taxpayers are going to pick up that cost."

A crucial issue to resolve is the large number of Hispanics who are "unbanked," Mata says. Immigrants make up more than 40% of the population, and many come from countries with unstable banking systems. As a result, many Hispanics distrust banks and rely on cash.

"Younger people don't have the family tradition of their parents using banks, so they in turn don't use them either," Mata says.

The impending crisis might encourage companies like Bank of America (BAC), Citigroup (C), Fidelity and T. Rowe Price (TROW) to work harder to attract Hispanic customers.

Education, outreach and the support of employers is vital, Mata says.

"One of the great things about saving for retirement though your employer is that they bring in all these people who help you and give you information," he says. "It makes it so much easier and everything is pulled out of your check."

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