Alfonso, a 52-year-old owner of an accounting firm in Auburn Hills, Michigan, says about 60 percent of his clients are Latino business owners who are “not too keen on fancy investments.”

"We have a problem in that Social Security isn't enough, and we can't trust financial institutions to invest our money," the Cuban-born Alfonso says.

While stashing dollars in a mattress may be going a bit far, the back-to-basics approach is a clear reaction to eroded confidence in the three traditional pillars of retirement income: employer-provided pensions, Social Security, and personal savings—this last at an official national rate of 2.4 percent of disposable income in October 2008 but actually closer to zero or negative as people continue to finance their spending by borrowing, selling assets, or dipping into previous savings, according to the U.S. Commerce Department Bureau of Economic Analysis.

The Employee Benefit Research Institute (EBRI), a Washington think tank, found that only 41 percent of U.S. Hispanics say they have saved money for retirement, and that the Hispanic savings rate is slowing. In contrast, 66 percent of Americans overall say they have saved for retirement, the institute said in a 2007 report.

EBRI also reports that only about one of every five Hispanic workers participates in a workplace retirement savings plan such as a 401(k). And according to an AARP Public Policy Institute analysis of Federal Reserve Board data, only 32.5 percent of Hispanic workers have pension coverage, an individual retirement account (IRA), or other personal retirement account.

Make-or-Break Debate
After Wall Street's meltdown this fall, Washington is also rethinking how America saves.

"There's no way people can navigate the sales jobs mutual funds throw at them. What we have has all the hallmarks of a predatory system." — Teresa Ghilarducci, professor of economic policy and proponent of the GRA

Some policymakers say Americans should not invest all of their savings in the stock market and are proposing other ways for retirement funds to grow. Others are pressing for greater transparency in mutual fund fees, the elimination of hidden charges, and the inclusion of safer investment options in 401(k) plans.

For many Hispanics—plagued by lower incomes and less education, and less likely to participate in employer pensions—the debate in Congress over retirement plan reform is likely to have make-or-break consequences. The issue is expected to become a priority for the new Congress and for President-elect Barack Obama after he assumes office on January 20.

On Automatic Pilot
To help boost the savings rate for Hispanics and other Americans, Obama has proposed a plan supported by AARP that requires employers who do not offer their workers a retirement plan to set up an automatic IRA—auto-IRA for short—on their behalf. A small amount would be withheld from each paycheck and deposited directly into the worker’s IRA. Employees would be enrolled in the plan unless they explicitly elected to opt out, and companies in business for less than two years and those with fewer than ten workers would be exempt from the plan.

Janet McCubbin, director of economic issues at the AARP Public Policy Institute, calls the auto-IRA a "great first step" in promoting retirement savings among lower- and middle-income families. And, she says, the auto-IRA will be "even more powerful" if coupled with another Obama proposal: an expansion of the saver’s credit, which encourages low-income Americans to save money through tax credits.

Obama wants to match 50 percent of the first $1,000 of annual retirement savings for working families that earn under $75,000 and deposit the federal match automatically into IRAs or other personal retirement accounts. Unlike the current saver’s credit, the match would be available to all low- and moderate-income workers, even those who do not have an income tax liability. With a median income of $38,679, according to the U.S. Census Bureau, many Hispanic households would benefit.

Rep. George Miller, D-California, chairman of the House Committee on Education and Labor, backs the expansion of the saver’s credit, a proposal that is supported by AARP. He and lawmakers in both parties also are seeking the reduction of mutual fund fees and a requirement that 401(k) plans contain more low-cost investment options.

Legislators already have taken action to soften the effects of the stock market havoc on nest eggs. With Americans losing as much as $2 trillion in investment savings in the last 18 months, the outgoing Congress approved a bill that would suspend rules that force individuals 70-and-a-half years old and older to take “required minimum distributions” (RMDs) from now-shrunken investment accounts, limiting their ability to recoup losses. But the suspension will apply only to 2009 withdrawals.

Safer Alternatives?
Teresa Ghilarducci, a professor of economic policy at New York City’s New School for Social Research, says Congress should do more to help in what she views as a "long-term retirement crisis” and offer Americans a safer alternative to the 401(k) and IRA.

She's championing a new idea, the Guaranteed Retirement Account, or GRA. Workers and employers would jointly contribute 5 percent of an employee's earnings into a government bond account. The federal government would pay each account a 3 percent annual return, adjusted for inflation, and also help workers save by depositing an additional $600 a year into each GRA. When a worker begins to collect Social Security benefits, the GRA would pay an annuity based on accumulated funds.

Ghilarducci says workers should be allowed to trade in their IRAs and 401(k)s for GRAs. But she touched off a furor when she detailed her plan at an October hearing in Rep. Miller's committee. Right-wing bloggers accuse her of preparing a government takeover of 401(k) accounts, and mutual fund managers claim the massive transfer of retirement money out of the stock market would speed the decline of the economy.

Ghilarducci counters that average Americans suffered retirement account losses because they couldn't—and shouldn't be expected to—know how to manage investments in the stock market.

"There's no way people can navigate the sales jobs mutual funds throw at them," Ghilarducci says. "What we have has all the hallmarks of a predatory system."