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Workplace benefits, including retirement plans, insurance coverage, and pretax health accounts, are an important steppingstone to financial wellness, giving working Americans who are eligible access to the financial products and services they need to protect their families and save for future goals.
But as I pause to reflect on my own experience as an Asian American during national Asian American and Pacific Islander (AAPI) Heritage Month, I am also acutely aware that culture plays a critical role in our ability to harness those benefits to build wealth.
Indeed, so much of our spending and saving philosophy is shaped by who we are and where we’re from — by the input we receive from our family and community.
Consider Asian American and Pacific Islanders, a diverse population that traces its roots to 20 different countries in East and Southeast Asia, as well as the Indian subcontinent, and is projected to surpass 46 million in the U.S. by 2060.1
According to a recent MassMutual study, Asian Americans have the highest income and assets of any minority group.2 We also fare well financially compared with all Americans, including our white peers.
- Some 73 percent of Asian Americans have an annual income of $75,000 or more, versus 56 percent of all other respondents.
- We have higher investable assets — 35 percent have $300,000 or more compared with 22 percent of other respondents.
- And 61 percent of us own stocks, versus 54 percent of other respondents.
Despite our position of relative wealth, however, Asian Americans are the least confident about our current financial well-being — just 29 percent of survey respondents indicated that they are comfortable with their financial status versus 42 percent of all other respondents.
We are also the least hopeful (43 percent versus 61 percent of all others) and optimistic (39 percent versus 59 percent of all others) about our financial future.
That is partly explained by the fact that many of us or our relatives emigrated to this country with little or nothing. We fought hard to provide for our families and to help the next generation succeed. We’ve known what it means to struggle and aren’t convinced that our financial challenges are behind us. As such, we often need an oversized cash position to feel secure.
But our collective uncertainty may also reflect the fact that we as an ethnic group often eschew professional guidance. Indeed, MassMutual research revealed that we are less likely to be working with a financial professional, with 73 percent of Asian American respondents indicating that they do not currently work with a financial professional, compared with 62 percent of all others.
We’re self-starters. In my own household growing up, we were raised with a do-it-yourself mentality around financial planning. My parents are dedicated to self-education, watching the financial news channels faithfully and reading up on it every day.
Yet, the solo approach to money management can sometimes result in missed opportunities.
Financial professionals offer a valuable service, helping clients put their hard-earned savings to work, create financial safety nets, and implement an investment strategy to reach their short- and long-term goals. Having a financial plan that aligns with your goals, risk tolerance, and retirement time horizon also alleviates anxiety about money, the single greatest stressor for most Americans.3
While balancing your need for a cash cushion, a financial professional can help you shift your savings strategy from one that may be losing purchasing power due to inflation to one that delivers growth.
Financial professionals, of course, can also help you maximize your workplace benefits so that you don’t leave money on the table, including employer contributions to your retirement plan. They can often offer advice about the financial products and services that have already been vetted by your employer, which promotes peace of mind. And they can educate you about pretax savings tools that may reduce the income tax you owe.
That said, the relationship clients have with their financial professional is highly personal. It is paramount that you find someone you trust — someone who understands your unique concerns and objectives. Start by asking for recommendations from friends and family who are happy with the financial advice they have received. Then, interview several. Be sure to ask for specifics on what they would do to help you reach your goals, the costs you will incur, and how they get paid. And always check their background for any complaints using the FINRA BrokerCheck tool if they offer investments. (Related: What questions to ask a financial professional at a first meeting)
The value of life insurance
Beyond working with a trusted professional, we as members of the AAPI community can potentially bolster our financial independence by our willingness to explore workplace benefits that we may previously have dismissed.
For example, while Asian Americans are highly focused on saving for our retirement and our children’s education, MassMutual data reveal we are the least likely of any group to have life insurance coverage (45 percent of Asians versus 57 percent of all others).
Life insurance can be a powerful protection product. It provides a death benefit to your loved ones if you should pass away while the policy is in force, which helps to ensure that those who depend on your income may be able to maintain their lifestyle.
Life insurance benefits are generally paid out income tax free. (Learn more: Life insurance: 3 income tax advantages)
There are two primary types of life insurance:
- Term life insurance pays out a death benefit only if you pass away within the term of the policy, which may be 10, 15, or 20 years. If you outlive the term you selected, you can cancel your policy or renew it, but if you keep it, your premiums will rise significantly. Term life coverage is less expensive than whole life insurance, offering a bigger potential death benefit for a lower premium, but it does not accumulate cash value or offer affordable lifetime coverage. Employers often include group term life insurance coverage as part of their benefits package, which is a good start, but may not provide the amount or type of coverage your family needs. (Learn more: Is group life insurance at work enough?)
- Whole life insurance is more costly, but also more flexible. Such coverage provides a guaranteed death benefit to your heirs no matter how long you should live (as long as your premiums are paid), making it a potentially valuable estate planning tool. A guaranteed death benefit may liberate policyowners to spend their retirement savings freely without fear of depleting their children’s inheritance. Importantly, whole life insurance policies also build cash value (with potential for dividend growth) with each premium payment — money that can be used on a tax-advantaged basis during your lifetime to cover emergency expenses, pay for their kid’s college, or supplement retirement savings.4 (Discover more: Choosing between term and permanent life insurance)
(Calculator: How much life insurance do I need?)
Some employers offer group whole life coverage as a benefit, coverage that is typically portable — meaning the employee owns the policy and the accumulated cash value and can take it with them even if they change jobs. Group term life coverage, by contrast, typically stops when you leave that employer.
Because both the death benefit and cash value growth on a whole life insurance policy are guaranteed — and not subject to market fluctuations — such coverage can help reduce financial uncertainty. That may appeal to members of my AAPI community, who are statistically more risk averse.
MassMutual research revealed that:5
- Asian American retirees and pre-retirees are more worried about assuming too much risk (69 percent compared with 44 percent of other Americans) and making poor investment decisions (67 percent compared with 54 percent) within 15 years before we retire or after.
Disability income insurance
Other workplace benefits that can potentially help support financial wellness, but are often overlooked, include disability income (DI) insurance, which is designed to replace a portion of your income if you are unable to work due to a qualifying illness or injury. (Learn more: 6 ways group disability income insurance may fall short)
Your income is likely your greatest asset and disabilities may be more common than you think. According to the Social Security Administration, 1 in 4 of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach retirement age.6 (Calculator: Disability income insurance calculator)
Flexible spending accounts (FSAs) and health savings accounts (HSAs)
Medical bills, which are often unexpected and unavoidable, can take a bite out of your budget, even if you have health insurance. A 2019 survey found that roughly 1 in 5 (19 percent) respondents said someone in their household had been contacted by a collection agency in the past 12 months because of medical debt, and 9 percent said they have at some point declared personal bankruptcy because of unpaid health care fees.7
The pretax savings vehicles offered by many employers, including FSAs and HSAs, may not prevent illness or injury, but they can help you manage the expense. They can also lower your taxable income in the year you contribute. (Related: Saving for medical costs: FSA, HSA, or both?)
Education is key
Financial literacy is key to helping all working Americans — regardless of race, gender, income, or ethnicity — secure their future.
Employers can help workers achieve retirement readiness and protect the ones they love by encouraging them to take full advantage of the benefits they provide. Just as the financial community can lean into the unique concerns and goals of specific communities with education outreach campaigns. Let that begin with AAPI Heritage Month.
Discover more from MassMutual…
MassMutual Asian American community page
Money pools, microloans, and informal loan clubs
Need a financial professional? Find one here
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1 Pew Research Center, “Key facts about Asian Americans, a diverse and growing population,” April 29, 2021.
2 Multicultural Consumer Study, conducted for MassMutual by LRW, a Material Company, October 2021.
3 American Psychological Association, “Stress in America,” March 2022.
4 Access to cash value through borrowing or partial surrenders will reduce the policy’s cash value and death benefit. It also increases the chance that the policy may lapse and could result in a tax liability if the policy terminates before the death of the insured.
5 MassMutual, “MassMutual Asian American Retirement Risk Study,” May 30, 2018.
6 Social Security Administration, “The Faces and Facts of Disability.”
7 Kaiser Family Foundation/LA Times, “Survey of Adults With Employer-Sponsored Health Insurance,” May 2, 2019.