Post: Outside the Box: Are immigrants the ultimate frugal retirees?

Bo Thao-Urabe arrived in the U.S. in December 1979, at age 6, after her Hmong family had fled Laos and spent three years at a refugee camp in Thailand. Her family first settled in Chicago and eventually moved to Minnesota by way of Wisconsin. When she started her career after graduating from college, she knew a portion of each paycheck would go to support her parents.

“One of the things that I learned in financial literacy was to put money away for yourself 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 improve the community. “I understand the concept of it. But I usually think of my mom or my dad or my sister or the people who are not in the same place that I am and to support them first, to make sure that they are OK before I could think about investing solely in myself.”

Read: When Social Security isn’t enough — here are the best ways to close the racial retirement gap

We know America’s population is aging and that worries about retirement security — and insecurity — rank high among household worries. Less appreciated is that America’s foreign-born population is also getting older. Immigrants 65 years and older account for almost 14% of America’s total population and that figure should swell to 21% by 2040, estimates the Census Bureau. 

America’s older immigrant population is highly diverse by any number of measures. Some older immigrants are doing well financially, perhaps because they founded a dynamic enterprise or worked at companies with benefits. But many aging immigrants find themselves with little after laboring at physically demanding jobs with low wages and no benefits.

“This population isn’t on anyone’s agenda,” says Mary Lopez, economist at Occidental College. “Nobody cares about the retirement decisions of immigrants.”

We should care, of course. But there is much the rest of society can learn from immigrants about navigating the challenges of retirement, especially from those with little to no savings. Immigrants living on lower incomes are often creative and collaborative with their finances. “Despite enormous obstacles, people at the margins find ways to manage their financial needs and obligations,” writes Jose Quinonez, founder and chief executive officer at the nonprofit Mission Asset Fund in San Francisco, and 2016 MacArthur Fellow.

Want more retirement news and advice? Read MarketWatch Retirement

Think about the dominant messages in mainstream retirement literature. The basic approach emphasizes what you can do as an individual. But relatively few people find themselves flush with savings at retirement, even those with the benefit of an employer-sponsored savings plan. Saving is hard while raising kids, paying for college, dealing with spells of unemployment and other challenges. Yet it’s largely an individual’s obligation to get their retirement act together.

“In the U.S. you’re 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 City.

In sharp contrast, personal finance for many immigrants, especially those living on lower incomes, starts with family, extended family, neighborhood, and community. Financial goals are reached by collaborating, sharing, and pooling resources, including for finding a measure of financial stability in the retirement years. “A collectivist approach is often attributed to culture,” says Gonsalez-Rivera. “There is some truth to that. But much more of it is economic security.”

What might be some critical lessons to consider? How about the multigenerational home? More than 20% of the American population lived with parents, grandparents, grandchildren and other relatives in 2016, up from 12% in 1980, according to Pew Research Center. A major factor behind the resurgence is foreign-born Americans are more likely than those born in the U.S. to live with multiple generations under one roof. “Many more older immigrants live in an extended family and get food and a roof over their head,” says Gonsalez-Rivera.

The multigenerational home is a financially efficient arrangement. For instance, the older generation may take care of children while the younger adults focus on building their careers. Older adults might run a home-based side hustle. The benefits extend well beyond the financial. “The value of elders is to transfer knowledge” says Thao-Urabe. “Stories, culture, and being helpful to family.”

Older immigrants who are still working may participate in savings circles. Savings circles go by different names, such as tandas (Mexico) and tontines (Cambodia and West Africa). They typically involve a group of people putting regular small cash contributions into the savings pot. The members of the savings circle know each other and hold each other accountable. The payouts can go to everything from medical bills to fixing cars. Simply put, a group of people come together to mutually solve economic problems.

“They help each other,” says Jeffrey Ashe, adjunct professor of international and public affairs at Columbia University and director of community finance at Oxfam America. “They’re taking care of business and they’re taking care of each other.”   

Finally, one of the best ways to boost economic security is to work longer, although because of health it isn’t always a realistic option. Among the returns to 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 claim, compared with age 62, which is the earliest age to start receiving benefits. Older immigrants on average work longer than their native-born peers for a variety of reasons. Whatever the motive, the bottom line from a 2019 scholarly study by Occidental’s Lopez and Sita Slavov, professor at the Schar School of Policy and Government at George Mason University, is that immigrants are “significantly less likely than natives to retire in their late 50s and early 60s, and to claim Social Security before full retirement age.”

None of these lessons should minimize the hardships so many older immigrants confront. But the time-tested approach of pooling resources to improve financial outcomes is something the rest of us should keep in mind when planning for our retirement.

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