Association for Public Policy Analysis & Management

While the lack of retirement savings is widespread among people in the United States, this problem affects certain segments of the population to a greater degree. Among retirees, it is observed that Hispanics and blacks are less likely than whites to have retirement savings in the form of 401(k) and IRA (we refer to non-Hispanic blacks and non-Hispanic whites when we refer to “blacks” and “whites”). In fact, the latest Report on the Economic Well-Being of US Households in 2017 shows that while 20 percent of whites have no retirement saving, 39 and 43 percent of blacks and Hispanics have none, respectively (Federal Reserve, 2018). Data from this report also show that minorities feel less prepared when it comes to retirement. When households are asked if they perceive that their savings for retirement are on track, 43 percent of whites feel they are on track, but only 28 and 25 percent of Hispanics and blacks feel that way, respectively (Federal Reserve, 2018).

We developed and conducted a community based randomized control trial to evaluate the impact of an intervention to promote retirement saving among low and moderate income, predominantly Spanish speaking Hispanics, who do not have access to an employer sponsored retirement account. Our educational intervention provided participants with key information related to financial planning for retirement in Spanish and made use of “behavioral nudges” to encourage participants to open a federal sponsored retirement saving account, my Retirement Account (myRA). Among 142 participants (70 and 72 in control and treatment groups, respectively), we found a significant difference-in-differences (DD) on the proportion of those who opened a myRA. In the treatment group we had 14 percent of participants opened myRA, while in the control group we had no one. Results from a DD regression show that after controlling for observable and unobservable characteristics through our design as a randomized controlled trial, the effect of our intervention is 12 percent. When we restrict our sample to those participants who had a bank account at some point of the study, we find that the effect of our intervention is higher (17 percent). We also found that our intervention is effective increasing self-reported knowledge related to retirement saving and preparedness.

Our findings are relevant because of the state sponsored retirement saving plans that are currently developing. We are the first to provide an evaluation of a government sponsored retirement saving plan. The findings from our study are useful for the design and implementation of government sponsored retirement saving plans such as CalSavers. According to the website of the California State Treasurer Office, there will be a pilot of the retirement saving plan CalSavers in late 2018, and this program will be open for statewide enrollment in 2019. Findings from our study suggest that education programs should be at the center of the CalSavers program to get minorities to participate.