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Life Health > Annuities

Retirement Planning Considerations for Immigrants

By Ashvin Chheda

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What You Need to Know

  • The author contends that immigrants and their children often have a different way of looking at personal finance.
  • Many immigrants come from countries where the normal retirement age is less than 65.
  • Some immigrants are counting on getting financial support from their children.

First-generation immigrants and their American-born (or raised) children may hold distinctly different views of money. Divergent viewpoints on money between generations can lead to misunderstandings and tensions within families. Unfortunately, first-generation immigrants (those born in another country) may also fail to plan adequately for retirement if they cling to the financial traditions of their home countries.

Understanding how different generations view money along with smart retirement strategies for first-generation immigrants can help foreign-born individuals create a stable financial future.

First-Generation and Second-Generation: How They View Money

First-generation immigrants tend to favor the financial practices of their home country. This is completely natural and normal. Their kids though (the second-generation) may be well assimilated and have no ties to the financial approaches of their parents’ homelands.

For example, first-generations immigrants may come from countries where sharing money with extended family is commonplace. Because of this cultural tradition, they may feel a sense of duty to care for older relatives as they retire, even after they move to the United States.

As you might have guessed, this scenario can lead to some first-generation immigrants neglecting retirement savings since they assume their children will help support them in their older years.

Second-generation immigrants, however, may not want to continue this money-sharing approach as it is not a common practice in the United States. As a result, first-generation immigrants may find themselves underprepared for retirement, which can lead to hardships later on for both them and their children.

How First-Generation Can Prepare for Retirement

Clearly, first-generation immigrants need to examine their assumptions about retirement and plan ahead for the future. As the Social Security Administration (SSA) explains, immigrants may have fewer quarters of covered earnings, which could lead to lower Social Security payments in retirement. According to the SSA, foreign-born individuals may need to fill those gaps with private savings and wealth-building options.

A fair number of my clients that have come to the United States later to work, also bring a mindset of earlier retirement. For instance, the traditional retirement age in India is 60. What is important here is that my clients understand the implications of a lower social security payment without the 35 years of funding and the implications of living longer with increasing health care expenses. The challenge is to guide them through this to plan appropriately.

For some immigrants, their employers may be an excellent source of retirement planning, including employer-sponsored 401(K) accounts. However, it is always prudent to seek insight and guidance from professional financial representatives. By consulting with financial professionals, your clients can learn general retirement tips and understand the resources they need, such as whole life insurance, which can be used for retirement income, and other retirement savings or investment accounts, to achieve their desired retired lifestyle. Equipped with this insight, immigrants can set savings goals and choose the right mix of financial tools to help meet financial objectives for retirement.

Building Financial Understanding Across Generations

It’s common for generations to view the world and engage with money differently. Immigrant families though have the added complexity of dealing with various different cultural assumptions.

Learning about retirement options and strategies is critical to overcome these challenges. Not only can this education help first-generation immigrants prepare for a solid financial future, but it also helps second-generation immigrants understand how to best help their parents and themselves meet all their financial goals.

Ashvin Chheda (Photo: OPES)  Ashvin Chheda, ChFC, CLU, RICP is president of OPES One Wealth Innovation and Protection of Addison, Texas. He was born in Ibadan, Nigeria.

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