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United States retirement crisis hits lower income families the hardest

Every single day in the United States on average 10,000 people turn 65 years old. “This country is having a crisis right now. A very silent crisis, where people that reach retirement have not saved enough for retirement. This forces them to work into their 70s, leave their homes and move in with family, because they simply cannot afford the cost of living,” reveals Alejandro. Alejandro Caminos is a first-hand witness of the retirement crisis in the United States of America as a Financial Adviser at Eagle Strategies LLC a subsidiary of New York Life. Alejandro lives in the San Francisco Bay Area.

“The biggest issue that we see today is that people are retiring and running out of money,” explains Alejandro. “You see the harsh reality. You can see it by going to a Wal-Mart store, or other big chain stores, or going to a car rental at the airport. What you will notice is a lot of people who are over 60, working. The main reason behind this is that they did not save for retirement and are forced to supplement their income in some fashion.”

“I come across many dire situations. In some cases, households do not even have enough money to pay for the burial costs of their relative. This forces them to set up a fundraising effort to help the family cover the costs. Whether it be sell ice cream after church on Sunday or seek assistance from family and friends.”

A staggering 18.5% of US citizens of 65 and older remain in the labor force. And this number is expected to increase up to 31% by 2022 (Source: US Bureau of Labor statistics, 2016)

Why does Alejandro know all of this?

Alejandro has worked for over 22 years in the financial sector. Most recently he joined Eagle Strategies LLC / New York Life, because he wanted to find a sustainable company within the world of finance where the clients take center stage at all times, and less focus on profitability.

“I grew up in South America, in Venezuela, and came to the United States when I was 17. I spent most of my finance career traveling the world and working in different communities. Four years ago, I decided I wanted to really focus on the San Francisco Bay Area where my family is growing up. I wanted to really understand the dynamics that are going on here, which are more and more contrasting. On one side you have an astounding amount of wealth being created out of the technology industry and Silicon Valley. On the other, you have an increasing amount of poverty, homelessness. A very large immigrant population comes in from Asia and South America. In some ways it has a third world country feel.”

Alejandro Caminos

This was when he learned about New York Life, a mutual company owned by its clients and one of the largest life insurers in the world.

If Jane retires, she will be an extra cost for her family

“On Saturday I was at the house of a woman in her fifties, let’s call her Jane. Jane is married to her husband, also in his fifties,” Alejandro begins to unravel. “They are both house cleaners. Their three daughters live with her, with their two kids. Jane’s parents also live with her, who are in their seventies. So, you got a family of nine people living in a house that has maybe two bedrooms, two baths. They have had to turn the garage into a living space.”

Alejandro explains how many low-income families reduce costs by sharing the economy and living together. And Jane is not the only one. In 2012, a record of 57 million US citizens, or 18% of the population, lived in multigenerational family households. Double the number who lived in such households in 1980 (Pew Research Centre, 2014). Yet, those situations are fragile. If something were to happen to Jane, an income stops in her household and she becomes an expense.

What happens at retirement, if a person has not saved money and cannot work anymore, is that the household loses an income, and the person becomes a cost.

That is also what happens at retirement, the retiree becomes an expense. And we haven’t even started talking about the medical or long-term care costs that older people need,” Alejandro says, painstakingly. “Those things are not covered by the governmental medical program and can become very, very expensive. If they fracture a hip and need someone to dress them, if they need professional medical attention for diabetes like a dialysis or even just getting diapers changed, this responsibility now falls on the family.”

“And so what happens, is that the problem is compounded. The family has to make a rotating schedule so at least one person can stay at home with that (great) grandparent. And that is one day of lost income per person, per week. So now the household is making less money and the costs have escalated, as they have to spend more money on medication, on equipment.”

The consequences are huge. Some elderly become homeless. Currently 31% of the US homeless population is over 50 years old (Dennis P. Culhane, 2013).

“The retirement crisis is a contributing factor to our homeless situation,” Alejandro is confronted with this on a daily basis. “I have been here since 1999, and I have never seen what I see today. Which is tent cities under the highways, in parking lots, on sidewalks in San Francisco.”

Currently 31% of the US homeless population is over 50 years old (Source: Dennis P. Culhane, 2013)

Lower-income households in the informal economy excluded from retirement programs and rising FinTech innovations

There are many ways people like Jane can be helped. New York Life also offers retirement programs. The problem is that these retirement and saving tools are often offered through working at a company. But Jane is part of the informal economy. New York Life is one of the few institutions that has a focus on lower-income households through financial planners like Alejandro.

“A lot of institutions have the same tools that I have available,” Alejandro says. “But they chose not to focus on the lower income population because it is too much work, and too little pay. That is the reality.”

So how can we serve this part of the population? How can we include them in the economy? According to Alejandro this calls for innovation in technology.

“What we expect, and hope, is that new tech startups, the new generation of FinTech, will make it easier and less costly to provide services to low income populations.”

Currently a grand portion of the lower income population is excluded from many FinTech platforms because a lot of them require Internet access.

“If you were to talk to low-income families, most of them do not have the type of telephone that you and I have with access to the Internet,” Alejandro shows what he experiences in his daily communication with lower income families, around 40% of his clients. “Even if they have a phone that allows Internet, sometimes they can only afford phone calls. And if you also don’t have a computer in the house, or if that computer is being shared between ten people, you have little to no access.”


Access to Internet can be expensive, and can therefor automatically exclude lower income families from FinTech platforms.

“I think the technology has to be less focused on the client and more focused on the provider. “What type of technology can the provider create to be able to lend to these individuals? That is really where the focus on technology should be.”

Enviu and New York Life further scope the issue


“A lot of research still needs to be done on this. And part of the pilot we are doing with Enviu is to gather more data,” Alejandro points out. Enviu has organized a mini-pilot with lower income communities in San Francisco to get a clearer view of their needs.

Enviu has a lot of experiential data that they have developed in Ghana in creating a micro pension system,” explains Alejandro. “And we can take that information, intelligence, and experience and translate it, so it can be applicable here, in the San Francisco bay area.”

In Ghana Enviu founded People’s Pension Trust, a pension solution that serves the informal economy. But Enviu’s vision is an inclusive economy that serves all people. This goes beyond Ghana. That is why Enviu is working together with New York Life to scope the issue and to see what role we can play in solving it.

If the retirement crisis and people like Jane have your heart, and you or your organization also want to play a role in solving this, get in touch with us!

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