Going Without the Basics

By: Theodore Fischer | Fall 2008

To stay afloat during the current economic slump, Francisco Caraballo has had to drive less, slash his entertainment budget, and even reduce his kids' allowances. "But the worst sacrifice is that I stopped contributing to my retirement account," says Caraballo, 49, of Sunrise, Florida. "To stretch your paycheck, you have to leave things out. You have to dig into your savings account, and you know you're not going to be able to live the same lifestyle once you retire."

The downturn is forcing many Hispanics ages 45 and older to make similar decisions, some of which could have dire long-term consequences, according to AARP's survey, "The Economic Slowdown's Impact on Middle-Aged and Older Hispanics." The outlook, respondents believe, isn't bright. Today 86 percent of older Hispanics rate the U.S. economy as "fairly bad" or "very bad," and three quarters expect the economy to get even worse.

For Hispanic survey respondents like Emanuel Gonzales, 86, the slump has meant tightening their belts, cutting luxuries, and making lifestyle sacrifices. "I don't travel as much, and I watch my buying. I just buy what I have to have. I don't go for any extras," says Gonzales of Raton, New Mexico. More than 70 percent of those surveyed say they've cut spending for entertainment and eat out less. In fact, more than 62 percent have postponed travel.

And for many Latinos, the situation is even more critical. Eight in 10 find it hard to pay for essentials such as food and gas. Seven in 10 say it's difficult to cover utilities such as heating, electricity, and phone service. More distressing: 22 percent, or more than one out of every five Hispanics, are cutting back on their medications. With a population of nearly 9 million Hispanics 45-plus, that equals about 2 million Latinos who are putting their health in jeopardy. That's a larger percentage than in the general population, of which 14 percent has been forced to cut back on medications.

Others make tough choices to pay for their prescriptions. To cover her asthma medications after her husband's employer reduced his hours from 40 to 35, Evelyn Arraya's family has slashed expenditures on food, entertainment, and clothing. "We had to cut a lot of things down, but at least I could breathe and still live a little bit longer," says Arraya, 51, of Deltona, Florida.

Making It Home
But a greater distinction between the Hispanic and general population arises concerning housing. The epidemic of mortgage foreclosures sparks considerable concern because, compared to the general population, Hispanics have a great share of their assets tied up in their homes. While 85 percent of both the Hispanic and general population own homes, only 46 percent of Hispanics invest in stocks and bonds, compared to 63 percent of all older Americans in general.

Forty-one percent of Hispanic respondents, compared to 26 percent of older Americans in general, are having difficulty paying their mortgage or rent. More than four in 10 Hispanics fear losing their homes—compared to only a quarter of the general population—and nearly eight in 10 Hispanics—compared to seven in 10 of the general population—are concerned about the safety of neighborhoods with many foreclosed homes. Nearly 60 percent of older Hispanics believe the foreclosure crisis impacts the safety of their own neighborhoods, a feeling shared by less than 40 percent of all respondents. Two out of three Hispanics age 45 and older, compared to only one out of three of all older Americans, say the foreclosure crisis has affected the value of their own homes.

Work and Retirement
Other crunch-time financial decisions will also have long-term implications. More than a quarter of Hispanics say the economic slowdown has forced them to postpone retirement plans—compared to only 16 percent of all respondents—and among all older Americans, about one in five have increased the number of hours they work. About 10 percent have taken on a second job. One third of Hispanics, as well as the general population, have stopped contributing to their 401(k)s, IRAs, or other retirement accounts, and about a quarter of Hispanics and the general population are raiding their accounts prematurely and withdrawing funds at a penalty.

Meeting the Challenge
To help face these challenges, during the previous year, 18 percent of Hispanic respondents helped their parents meet expenses and 5 percent had parents move in with them. More than 40 percent have helped a child pay bills or expenses, and 14 percent have had children move back home for financial reasons.

"I've been helping out my kids quite a bit," says Antonia Burger, 71, of Toledo, Ohio. "One son filed bankruptcy. One son who was in Hollywood moved back here. Another set of kids can't even afford a home; they're renting, and they can't save enough for a down payment."

As is typical for Hispanic families and their communities, in the face of these hard times, they're pulling together for support.