Longevity and greater spending are "putting the U.S. retirement system under immense strain," BlackRock CEO Larry Fink wrote in his annual shareholder letter.
In the letter, bluntly titled “Time to Rethink Retirement,” Fink argued that capital markets will be critical in addressing what he called one of the century’s biggest challenges, “providing people with a secure, well-earned retirement.”
Innovations in medicine are leading to longer lifespans and a “frustrating irony: As a society, we focus a tremendous amount of energy on helping people live longer lives. But not even a fraction of that effort is spent helping people afford those extra years.”
Fink’s letter comes as concerns over Social Security’s solvency continue to dominate headlines, and debate grows among academics and policymakers over the effectiveness of defined contribution-style retirement plans.
“No one should have to work longer than they want to. But I do think it’s a bit crazy that our anchor idea for the right retirement age—65 years old—originates from the time of the Ottoman Empire,” Fink wrote.
He praised state-sponsored plans—specifically mentioning Colorado and Virginia—and noted the auto-features in SECURE 2.0.
“As a nation, we should do everything we can to make retirement investing more automatic for workers,” Finke wrote. “And there are already bright spots. Next year, a new federal law will kick in, requiring employers that set up new 401(k) plans to auto-enroll their new workers. Plus, there are hundreds of major companies (including BlackRock) that have already taken this step voluntarily.”
He called for plan sponsors to do more, like providing a match and offering financial education on the difference between contributing a small percentage to a retirement plan versus the maximum amount allowed. He also mentioned auto-portability, and the need to easier for workers to transfer their 401(k) savings when they switch jobs.
“There is a menu of options here, and we need to explore all of them,” he wrote.
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