Latinos and Retirement: 7 Key Questions Answered 

Bottom line: The rules on receiving Social Security abroad can be complicated, especially for non-U.S. citizens. If you or members of your family intend to retire abroad, research your situation thoroughly. The SSA publication Your Payments While You Are Outside the United States has detailed information on qualifications and conditions.

3. What is the biggest expense in retirement?

No one can know for certain what their biggest retirement expense will be, but financial professionals consistently call out the big three: health care, housing and long-term care.

• Health care: The older we get, the more care our aging bodies need. Fidelity Investments estimates that a 65-year-old American retiring in 2024 will spend an average of $165,000 out of pocket on health care across their retirement. There's also a higher incidence of chronic diseases like diabetes in the Hispanic community, which may entail more extensive care and higher costs.
• Housing: Whether you’re renting or paying off a mortgage, shelter continues to be a major expense in retirement, one that is increasing faster than inflation overall. For homeowners, property taxes, home insurance and maintenance add to the bill. Almost one-third of Latino families live in a multigenerational household, often with distinct arrangements for sharing costs that can affected when a family member retires.
• Long-term care: Services for aging or chronically ill family members can really add up. According to Genworth, an insurance company that tracks long-term care costs, the median annual cost to hire a home health aide for 20 hours a week is about $34,000; for a room at a nursing home, it’s more than $100,000. For many Latino families, there’s traditionally been a preference for family-driven care, which can save on formal caregiving costs but often means lost wages when family members take time off work to provide care.

Bottom line: Some costs may be lower in retirement (no more commuting, for example, and tax breaks for people 65 and older), but your income probably will be lower, too. The more clearly you understand your specific situation and the costs that come with it, the better equipped you’ll be to save and budget to meet your needs. Use the AARP Retirement Calculator to get a personalized snapshot of how much you’ll need to retire when, and how,  you want.

4. I’m considering retiring early to care for a loved one. How can I protect my own financial security?

If you are in your 40s or 50s, you’re likely in your peak earning years. Taking time off or leaving the workforce entirely can mean missing out on substantial wages and employer-provided benefits, such as health insurance and matching contributions to a 401(k) plan. Before you decide to take early retirement, explore any workplace benefits you may have that would allow you to balance your caregiving and job responsibilities.

For example, nine states and the District of Columbia mandate paid leave for workers who need to take time off for caregiving; four other states are rolling out such programs over the next few years. Under the federal Family and Medical Leave Act, workers nationwide may qualify for up to 12 weeks of unpaid caregiving leave without risking their job. Some workplaces have Employee Assistance Programs that help workers balance job and caregiving obligations.

Look into what help is available to assist you in caring for your loved one. Ask family members, friends or others you trust to step up, and explore community programs and services that provide respite care and health, legal or financial resources. AARP Family Caregiver Resource Guides in multiple languages can help you locate these services, set up a care plan and track your finances separately from those of your loved one.  

Bottom line: Staying in the workforce is the best way to protect your retirement security. Before you decide to take early retirement, explore AARP’s Caregiver Resource Center for practical advice on navigating your situation, or call our toll-free caregiving resource line at 877-333-5885  (888-971-2013 for Spanish) for personal support and resources on a variety of caregiving topics.

5. I’m considering hiring a financial planner to help me with retirement. Where should I start?

Finding professional financial help that’s right for you can seem overwhelming. What kind of pro do I need? How can I get advice that’s both trustworthy and affordable? Here are some suggestions to get started.

• Find someone who gets you. Look for a financial planner who understands the cultural nuances and financial priorities of your household. Doing so increases the odds of guidance being sensitive to family dynamics and values — like supporting extended family — that may be important to you. Be aware that this may take time: Only 3.2 percent of certified financial planners (CFPs) are Latino.
• Do your homework. Personal recommendations from within the community may be a valuable place to start your search for someone experienced in working with Hispanic clients, but always be sure to do your own legwork. You can use the Financial Industry Regulatory Authority’s BrokerCheck tool to dig into the background and experience of advisers and firms you are considering.
• Check credentials. The CFP designation, awarded by a nonprofit board, is a widely recognized standard for professionals providing advice on investments, budgeting and retirement. Requirements include three years of financial-planning experience and passing a six-hour, 170-question exam.
• Ensure your interests are prioritized. Work with a planner who is a fiduciary. This means they are legally obligated to act in your best interest and not put their own personal gain first (by, say, steering you toward a particular financial product because it pays them a higher commission).

Bottom line: Hiring a financial planner can significantly ease the complexities of retirement planning. The CFP Board’s Let’s Make a Plan tool lets you search for certified financial planners by location and specialty (for example, elder care or retirement planning). AARP’s Interview an Advisor tool can help you prepare for and make the most of an initial meeting with a prospective adviser.

6. When can I withdraw from my 401(k) and IRA without facing penalties?

When you reach age 59½, you can start taking “qualified distributions” from your retirement accounts. The 10 percent penalty for what the IRS considers early withdrawals is waived from that point, although you’ll still owe taxes on what you take out if it’s from a traditional IRA or 401(k). (If you have a Roth account, you can withdraw your contributions at any time, tax-free and penalty-free. You can withdraw from your account earnings without penalty if you are older than 59½ and have held the account for at least five years.)

But if you’re asking this question, there’s a chance you’re considering an early withdrawal. Most financial pros advise against it. Not only will you likely owe taxes and penalties on the money, but you’re setting back your nest egg, removing funds that would otherwise be earning compound returns.

In other words, as much as you might need the money, early withdrawal from a retirement account generally is an expensive way to get it.

Federal law and IRS policy do allow some exceptions to the penalty. For example, you can periodically draw up to $1,000 from a retirement account for “personal or family emergency expenses,” or more for an “immediate and heavy” financial hardship arising from a medical emergency, natural disaster, domestic abuse, or threat of eviction or foreclosure, among other causes.

Bottom line: In most circumstances, you’ll have to wait to turn 59½ to withdraw from your 401(k) or IRA without facing penalties. Instead, consider tapping other savings (planners recommend building an emergency fund for just such occasions), asking family for help, or taking a 401(k) loan rather than a withdrawal.

7. If I’m still working at 65, when do I sign up for Medicare?

It’s good to ask about age 65 — for most people, that’s the Medicare eligibility age. (People with disabilities may qualify earlier.) But if you are still working, you may be able to delay enrollment, without incurring the penalties Medicare assesses for failing to sign up on time.

Here’s how it works:

If you work for a company that has at least 20 employees and provides health insurance, you can put off enrolling in Medicare until your employment ends or the workplace coverage stops. The same goes if you are covered through your spouse’s job at a similarly sized outfit.  When your (or your spouse’s) workplace coverage ends, you have up to eight months (called a special enrollment period) to get on Medicare.

There are different rules for smaller firms. If your workplace employs fewer than 20 people, it can require you to enroll in Medicare at 65.  In this case, Medicare becomes your primary insurer (meaning health care providers bill it first) and your workplace plan is secondary. If this is your situation, ask your employer how it handles this issue, well ahead of your 65th birthday.

If you are signing up at 65, you have a seven-month window. This initial enrollment period encompasses the three months before the month in which you turn 65, the birthday month and the three months after. So, if your birthday is April 15, your initial enrollment period is Jan. 1 through July 31.

If you started Social Security before turning 65, you’ll be automatically enrolled in Medicare Part A (hospital coverage) and Part B (medical insurance) at that age. In most cases, your premiums will be deducted directly from your Social Security payments.

Bottom line: Get to know your Medicare options and the rules governing your employment situation well ahead of time. Failing to sign up during the appropriate period can mean paying a hefty late enrollment penalty, for life. Visit the AARP Medicare Question and Answer Tool or Medicare.gov for detailed information on enrollment, eligibility and more, or contact Medicare directly at 800-MEDICARE (800-633-4227, press 8 for Spanish).