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Here’s why young adults in Puerto Rico are struggling financially

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Parade attendees wave Puerto Rican flags on Fifth Avenue in Manhattan during the annual Puerto Rico Day Parade. 

Luiz C. Ribeiro | New York Daily News | Tribune News Service | Getty Images

Young adults in Puerto Rico are on shaky financial ground, a study finds.

About 47% of respondents in the U.S. territory are financially fragile, meaning they lack confidence in their ability to absorb a $2,000 economic shock, according to a September report from the Financial Industry Regulatory Authority Investor Education Foundation.

“This is the first time a study of this nature has been done on Puerto Rico,” said report co-author Harold Toro. He is also the research director and chair in economic development research at the Center for a New Economy, an economy-focused think tank based on the island.

“It highlights things that people feel and experience, but that are hard to find numbers for,” Toro said.

More than half, or 59%, of adults ages 18 to 29 on the island are financially fragile, compared to 47% of those ages 30 to 54 and 41% of those age 55 or older, FINRA found. The organization in 2021 polled 1,001 adults who live in Puerto Rico.

“The financial fragility and capability more broadly in Puerto Rico … it’s pretty dire when we compare it to the mainland United States,” said report co-author Olivia Valdés, senior researcher at the FINRA Investor Education Foundation.

Financial fragility, particularly for young adults, is much higher in Puerto Rico than on the mainland U.S. More than half, or 59%, of 18 to 29-year-olds are financially struggling in Puerto Rico compared to 38% of the same age group in the U.S., according to FINRA data.

About 30% of U.S. residents overall were considered financially fragile in 2021, according to FINRA’s latest Financial Capability in the United States report, which polled 27,118 U.S. adults in 2021. The Puerto Rico survey was separate, but fielded at the same time.

The younger generation has experienced financial strain for over two decades.

Vicente Feliciano

founder and president of Advantage Business Consulting, a market analysis and business consulting firm in San Juan, Puerto Rico

Many young adults leave Puerto Rico to try and improve their financial situation, by seeking education or employment in the United States or in other countries. For the young adults who stay, the generation must contend with an economy under recovery, an electric grid hanging on by a thread and sky-high costs for basic needs like housing.

Understanding why young Puerto Ricans are financially fragile could help with efforts to retain younger residents and bring working professionals back to the island, experts say.

But “living in Puerto Rico can’t just be a matter of survival, it also has to be a place where you can thrive,” said Fernando Tormos Aponte, an assistant professor of sociology at the University of Pittsburgh.

Young Puerto Ricans are ‘having a tougher time’

To be sure, a certain degree of financial strain is typical for people just starting out. Generally speaking, financial standing gets better with age.

But financial fragility is more prominent among young adults in Puerto Rico compared to the U.S.

“People who are younger seem to be … having a tougher time,” Toro said.

Adults age 18 to 29 in Puerto Rico are less likely than adults ages 30 and over to report having emergency and retirement savings, FINRA found.

Less than a quarter, 22%, of 18- to 34-year-olds in Puerto Rico have any type of retirement account. Among that age group on the mainland U.S., 43% do, according to the broader FINRA analysis.

Young adults in Puerto Rico are also more likely than older residents to have student loan and medical debt.

Younger generations only know a Puerto Rico in crisis

Puerto Rico’s economy “is doing quite well,” said Vicente Feliciano, founder and president of Advantage Business Consulting, a market analysis and business consulting firm in San Juan, Puerto Rico.

The job market has improved, and salaries are growing at a faster pace than inflation, thanks to the increase in minimum wage, Feliciano said. While the federal minimum wage in the U.S. is $7.25, it’s $10.50 in Puerto Rico.

Employment in the private sector was at a 15-year high since mid- 2022, according to the Federal Reserve Bank of New York.

Still, the median household income on the island was just $25,621 in 2023, less than a third of the $80,610 median household income in the mainland U.S., per Census data.

Even though the last couple of years have been better, for adults under 40 in Puerto Rico, “most of their working lives have been overshadowed by the depression that Puerto Rico fell through from 2006 through 2015,” Feliciano said.

“The younger generation has experienced financial strain for over two decades,” he said. “They have seen many of their friends leave the country. They are frustrated. They blame the traditional [political] parties for something that may or may not be their fault, but is very real.”

‘We want people to come back’

Alejandro Talavera Correa moved to Washington, D.C. in 2019 for a job in finance. The role and pay were too good to pass up, he said: “People have to leave in order to get a competitive salary.”

But within a few years, he found himself moving back to Puerto Rico.

Talavera Correa, now 28, found an opportunity to return to Puerto Rico through El Comeback, an online job board that is tailored to include job postings that meet market salary standards or offer benefit packages for prospective applicants.

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“We want people to come back,” said Ana Laura Miranda, project manager of El Comeback. “We need to be realistic. We need to invest in employees and if we don’t have the salaries, then we need to create benefit packages.”

According to Miranda, the audience that mostly uses the platform are in their late 20s to those in their mid to late 30s. They vary from single adults to families with kids.

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The initiative is still in its early stages, and has attracted and retained 51 candidates, Miranda said.

Candidates are often looking to be close to family or regain the sense of belonging or warmth that comes with being in Puerto Rico, said Miranda. But young workers returning to Puerto Rico may face new financial challenges.

“There’s always going to be a certain pay cut,” as six figure salaries are not as common on the island as they are in the U.S. And “Puerto Rico is not cheap,” said Miranda. “The cost of living … it’s real. We cannot miss that.”

The island — like the mainland U.S. — has a housing market that’s unaffordable for many residents, and having a car is essential to get around because public transportation services can be unreliable.

Talavera Correa was fortunate to buy a condo during the pandemic when mortgage rates were low.

“If you don’t have that kind of money, you’re essentially stuck either renting or living with your parents,” said Talavera Correa.

Yet, like most Puerto Ricans on the island, he still struggles with regular blackouts and electricity problems. Those send him to his mom’s house, where service is more reliable due to her solar panels.

“Blackouts and problems with electricity are quite recurrent,” said Advantage Business Consulting’s Feliciano. “Electricity is a major distinction between the U.S. and Puerto Rico and it hits the younger generation harder than it hits the wealthier, older generation.” 

Despite the challenges, Talavera Correa is happy with his decision.

“It’s essentially the quality of life that you can have here in Puerto Rico. You have the beaches, everything outdoors, and the opportunity that you can have to have a happy life,” he said.

“But if that comes with economic restraints, or just overall living situations regarding the electricity, water … that disappoints a lot of people [who] come back.”

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Even U.S. presidents make mistakes with their money, author says

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Thomas Jefferson, 1848/1879. Artist George Peter Alexander Healy.

Heritage Images | Hulton Fine Art Collection | Getty Images

Before becoming president, ‘they are just like us’

Annie Nova: How much do presidents actually manage their own money? I imagine they outsource much of that strategizing and effort.

Megan Gorman: Well, up until most of them become president, they are just like us. They are managing their budgets and trying to grow assets. But what was striking in looking at their finances across different eras is that a lot of the same issues that we struggle with today, are ones that Americans have always struggled with.

The difference is that in many ways it is much harder today to achieve the American Dream. 

After all, Richard Nixon was able to go to college in 1930 for $230 a year. That’s around $8,000 in today’s dollars. And, in 1886, Grover Cleveland could buy a home on 26 and ¼ acres about three miles north of the White House for $21,500, the equivalent of $700,000 today.

‘Money caused and causes anxiety for everyone’

AN: Who was the most frugal president?

MG: Calvin Coolidge was incredibly frugal. He would have told you he was “thrifty.” Part of this comes from advice he received from his father growing up: that it was important to save and allow money to compound. Even when he was in the White House, the head housekeeper complained that he was always poking his head in to check on the cost of food being purchased.

The one that surprises most people was that John F. Kennedy was pretty frugal as well. Just because he came from money didn’t mean he wasn’t keeping an eye on the bottom line. Throughout his life, friends noted that he was “tight with a buck” and monitored costs.

AN: Was there a president who overspent?

MG: The biggest spender of them all was Thomas Jefferson. Jefferson had very nice taste, and that taste was enhanced from his time in France. If there was ever a dinner party you wanted to attend, it was Jefferson’s. Even up to the time he passed away, he was still trying to buy wine on credit.

Interestingly enough, given the debt he had when he was dying — more than $2 million in today’s numbers, he was clever in that he made sure in his estate plan that assets passed to his daughter and son-in-law could not be attached by creditors.

Megan Gorman, author of All The Presidents’ Money.

Photo: Marc Cartwright

AN: For whom did money cause the most anxiety?

MG: Money caused and causes anxiety for everyone. That being said, some handled it better than others. 

For instance, Ronald Reagan used budgeting as a mechanism to manage emotion when it came to money. This is no surprise given that he grew up in a financially unstable household with an alcoholic father. The Reagans would at times have to leave town in the middle of the night to get away from their landlord as they didn’t have the money to pay rent. As Reagan got older, he found that having a budget and sticking to it allowed him to manage his financial anxiety.

Early experiences informed money habits

AN: Who had the most financial struggles before becoming president?

MG: Harry Truman is one that easily comes to mind. Truman spent the first four decades of his life going through a lot of financial volatility. From his father losing all their money so he couldn’t go to college, to Truman having a series of unsuccessful business ventures including a zinc mine, an oil well and the famous haberdashery, he really struggled. 

But it wasn’t until he was in the presidency that he was able to save his salary along with a special stipend he received for two years that was tax-free. At the time of his death, he was worth $750,000, or $8 million today.

AN: How did a president’s childhood experiences impact their financial behavior?

MG: The best example would have to be Herbert Hoover.

Hoover’s story could have gone completely wrong for him. He lost both of his parents by the age of 9. He and his siblings are split up among different family members but they share the same financial guardian. So from an early age, Hoover is required to budget and submit his expenses to this guardian.

As he becomes a teenager, he takes on bookkeeping for his uncle’s business and really learns to be a “financial apprentice.” The budgeting and bookkeeping have such an impact on his financial skills that he becomes the treasurer of his class at Stanford. 

He just keeps building on his skill set again and again. That skill set would grow him great wealth — and allow him to do a lot of charitable work over his lifetime.

Money opps in post-presidential life

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Here’s the deflation breakdown for October 2024 — in one chart

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As inflation has throttled back from pandemic-era highs, consumers have seen prices decline outright for many household items.

This dynamic, known as deflation, generally doesn’t occur on a broad, sustained scale in the U.S. economy: With limited exceptions, businesses are generally loath to lower prices once they’ve increased, economists said.

But some pockets of the economy — largely, prices for physical goods from new cars to appliances, sporting goods, consumer electronics and certain apparel — have deflated over the past year, according to the consumer price index.

“We are seeing [deflation] to some extent,” said Stephen Brown, deputy chief North America economist at Capital Economics.

Largely, prices have pulled back as pandemic-era contortions in supply and demand dynamics unwind, economists said. The U.S. dollar has also been relatively strong against major global currencies, making it cheaper to import goods from overseas.

But supply chains have “normalized” and deflation has “moderated to a pretty significant degree” as a result, said Mark Zandi, chief economist at Moody’s.

Where there has been deflation

Prices for some categories — like furniture and bedding, men’s clothing, cosmetics and used cars and trucks — are down from October 2023, but they’ve rebounded somewhat in recent months, according to CPI data.

That said, used cars and trucks should see a resumption of deflation since “wholesale prices have fallen recently, and supply and demand continues to improve in the sector,” Bank of America economists wrote on Monday in a research note.

Energy prices and electronics

Gasoline prices are also “way down,” Zandi said.

They’ve declined more than 12% in the past year, according to CPI data. Drivers paid $3.05 a gallon, on average, at the pump as of Nov. 11, according to the U.S. Energy Information Administration.

Consumers “could get more relief there because global oil prices are soft,” Zandi said.

That softness may be in anticipation of President-elect Donald Trump’s proposed policies around China, said Zandi. Those may include tariffs of at least 60% on goods imported from China, a nation with a huge appetite for oil. If Trump’s policies were to negatively affect the Chinese economy, they’d also likely dampen China’s oil demand.

Annual inflation rate hit 2.6% in October, meeting expectations

Other energy commodities refined from oil have also seen huge price declines. Fuel oil prices, for example, are down over 20% in the past year, a trend that should contribute to lower prices elsewhere such as for airfare, economists said.

Food prices are also generally underpinned by their own unique supply-and-demand dynamics, economists said. Turkey, snacks and bacon are about 4% cheaper than they were a year ago, for example.

Lower energy prices can also take pressure off food prices, as it costs less to transport and distribute food to grocery store shelves.

Consumer electronics have also seen big price declines: Computers, video equipment and smartphones are respectively 5%, 10% and 9% cheaper than they were a year ago, according to CPI data.

But consumers might not experience those lower prices at the store: They may only exist on paper.

That’s due to how the Bureau of Labor Statistics measures inflation for certain consumer goods like electronics, economists said.

Technology continually improves, meaning consumers get more for their money. The BLS treats those quality improvements as a price decline, giving the illusion of falling prices on paper.

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House just voted yes to increase Social Security for some beneficiaries

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A bipartisan bill to change Social Security benefit rules for pensioners passed in the House of Representatives on Tuesday, with 327 lawmakers voting to support the measure.

Now, the proposal heads to the Senate, where the chamber’s version of the bill has 62 co-sponsors, “surpassing the majority needed to pass the bill on the U.S. Senate floor and send it to the president’s desk to be signed into law,” Reps. Abigail Spanberger, D-Virginia, and Garret Graves, R-Louisiana, co-leaders of the bill, said in a joint statement.

The proposal — called the Social Security Fairness Act — would repeal rules that reduce Social Security benefits for individuals who receive pension benefits from state or local governments.

It would eliminate the windfall elimination provision, or WEP, that reduces Social Security benefits for individuals who worked in jobs where they did not pay Social Security payroll taxes and now receive pension or disability benefits from those employers. About 3% of all Social Security beneficiaries — about 2.1 million people — were affected by the WEP as of December 2023, according to the Congressional Research Service.

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The bill would also eliminate the government pension offset, or GPO, which reduces Social Security benefits for spouses, widows and widowers who also receive pension checks. As of last December, about 1% of all Social Security beneficiaries — or 745,679 individuals — were affected by the GPO, according to the Congressional Research Service.

These rules, which have been in effect for decades, reduce the incomes of certain retired police officers, teachers, firefighters and other public servants, Graves said during a Tuesday speech on the House floor.

“This has been 40 years of treating people differently, discriminating against a certain set of workers,” Graves said.

“They’re not people that are overpaid; they’re not people that are underworked,” he said.

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On Tuesday, Larson voted against the Social Security Fairness Act, as well as another bill, the Equal Treatment of Public Servants Act. The latter bill would use a new formula for Social Security retirement and disability benefits for pensioners rather than eliminate the WEP. It would not change the GPO.

The bill, which was proposed by Rep. Jodey Arrington, R-Texas, failed when it was brought up for a vote.

“I could not vote for the bills on the floor tonight because they are not paid for and therefore put Americans’ hard-earned benefits at risk,” Larson said in a statement. “It would hurt most deeply the five million of our fellow Americans who receive below poverty checks, and almost half of all Social Security recipients who rely on their earned benefits for the majority of their income.”

Critics say the bill will weaken Social Security

The Social Security Fairness Act would add an estimated $196 billion to deficits over the next decade, the Congressional Budget Office has estimated. It would also move Social Security’s trust fund depletion dates closer by an estimated six months, according to the Committee for a Responsible Federal Budget.

“The long-term solvency of Social Security is an issue that Congress must address,” Spanberger said on the House floor on Tuesday.

“But that is a separate issue from allowing Americans who did their part, who contributed their earnings, for them to retire with dignity,” she said.

However, critics say Social Security’s funding woes should be a priority for Congress now. The program’s actuaries project the trust fund used to pay retirement benefits may be depleted in 2033, at which point 79% of benefits will be payable.

“This is not the right policy,” said Romina Boccia, director of budget and entitlement policy at the Cato Institute. “It’s what special interests were pushing, and politicians are responsive to their demands.”

Though the alternative bill proposed by Arrington would not address the GPO, it would provide a “fairer formula” for the WEP, Boccia said. However, broader changes are needed to shore up the program’s finances.

“We should reform Social Security so that it provides basic income security to the most vulnerable Americans in old age without adding to the debt or tax burden that younger workers face,” Boccia said.

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