The Retirement Riddle for Salvadoran Immigrants

by Manuel Carvallo, Hispanic Wealth

Over the past few weeks I have followed with attention the evolution of the Syrian refugee crisis, caused by a war that started in 2011 and has affected close to four million people; nearly a fifth of Syria’s population. I wondered about the long-term implications of such a massive displacement of people when I realized that we have a case closer to us, and therefore easier to relate to; the case of Salvadoran immigrants.Naturalization Ceremony Photo

Also urged by the desire to escape a long and cruel civil war, Salvadoran immigrants came to the U.S. during most of the eighties and by 1990 they were close to 465, 000. Family reunification and further hardships caused by natural disasters boosted migration again, and by considering their newly U.S.-born children, population from Salvadoran origin grew to an estimate of 2 million by 2011.

People of Salvadoran origin are the third largest Hispanic-origin group in the U.S., only after Mexicans and Puerto Ricans and the numbers of Salvadoran immigrants in the U.S. represent close to 15% of El Salvador’s population.

Salvadorans have taken roots in the U.S. so that by 2011 about 1.1 million or almost six of every ten, were either born in the U.S. or are U.S. citizens. The difference of close to 900,000 is comprised, by and large, of unauthorized migrants and those who have a Temporary Protection Status (TPS).

These Salvadoran immigrants keep strong connections with their homeland and provide significant support to their relatives by sending remittances. During 2014, their remittances reached an all time high of US$4.2 billion, which accounted for almost 17% of El Salvador’s GDP. What will be the impact of remittances as immigrants age?

Aging and a decrease in working capacity are related, particularly when labor depends on physical ability. As a consequence, a decrease in income and therefore remittances will inevitably follow, impacting the immigrant’s relatives and El Salvador’s GDP. How will this country support their elders? What will happen when immigrants reach retirement age? What will their options be?

photo of elderly woman Salvadoran immigrants by and large will not qualify for Social Security retirement benefits. As its name implies, TPS is not a permanent legal status, it is temporary, and it is not a path to citizenship. Since the TPS allows the holder to seek formal employment, many of them are paying the FICA tax to Social Security, but do not have the right to claim retirement benefits since these are granted to U.S. Citizens or permanent residents. Undocumented immigrants do not qualify.

Salvadoran immigrants, as most Hispanic immigrants, do not work for companies that provide retirement benefits, and there are no easy ways for them to save individually for retirement. Some immigrants will return and others will stay, but both without sufficient savings to fund their retirement.

Support of their elders at retirement can come from family, but assigning to their children the immigrant’s long-term retirement costs, could derail the economic projects of the next generation. An important consequence is easy to anticipate; as the kids take financial care of their immigrant parents, remittances to El Salvador will decrease substantially or stop.

El Salvador will likely be hit by a double whammy. The decrease in remittances due to aging immigrants and the need to care for those that once originated them. At this time there will be no easy solution.dancing woman

It is hard to anticipate the long-term implications of a refugee crisis. It is easy to spot the consequences of a long-term crisis when managed as short term. It has been at least 25 years now from the time Salvadoran refugees came to America, and with the benefit of hindsight, it is easy to observe the lack of programs designed to provide them with an end game.

Whether retirement is spent in the U.S. or in El Salvador, the resources needed to live during old age are not being planned or accumulated. The immigrant’s long tenure in the U.S. should encourage us thinking about the need to develop long-term savings programs where the immigrant can participate, instead of leaving their fate to the availability and goodwill of relatives or foreign aid.

Retirement naturally triggers decisions; will Salvadoran immigrants go back to a country that cannot support them? Or will they stay as a financial burden to their children? There are no easy answers.

Manuel Carvallo is President and Founder of Hispanic Wealth. Have a comment? Please send email to