BlackRock CEO Larry Fink.
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BlackRock Chairman Larry Fink said capital markets can help solve a crisis brewing around Americans’ ability to afford retirement as life spans lengthen and that the government can provide a basic safety net.
In his annual letter to shareholders of the investment firm that oversees $10 trillion in assets, Fink called the declining ability to retire financially one of the biggest economic challenges of the mid-21st century. He said access to investments can help solve that conundrum, while also wondering whether the expectation for everyone to receive Social Security benefits at age 65 has become obsolete.
“In America today, the retirement message the government and companies are telling their workers is essentially, ‘You’re on your own,'” Fink wrote. “And before my generation completely disappears from positions of corporate and political leadership, we have an obligation to change that.”
Fink pointed to a U.S. Census Bureau survey that found nearly half of Americans between the ages of 55 and 65 have no savings in personal retirement accounts. The investment firm’s leader noted that tens of millions of Americans work part-time or gig jobs that don’t offer clear plans for retirement contributions.
Worsening the outlook is a Social Security system that has said it won’t be able to pay full benefits until 2034.
The 71-year-old believes the US pension system has entered such a deep crisis that it has become a once-in-a-generation issue. He said it’s up to government and business leaders to start trying to fix it immediately.
A federal law that would require employers with 401(k) plans to automatically enroll new workers provides one bright spot, he said. Hundreds of companies have already taken that step, Fink noted.
But companies also have a duty to provide benefits such as capital matching or financial education to employees, he said. Fink also said workers should be able to easily transfer 401(k) savings when they change jobs.
About 20 states in the US have established retirement systems that include gig and part-time workers. Fink said more states should consider creating specific programs and acting as “retirement labs.” That’s because it can benefit individuals and help ensure the long-term health of Social Security.
Increasing life expectancy creates further difficulties when trying to improve the pension system, Fink said. This topic is increasingly important as blockbuster weight loss drugs have already begun to drastically reshape the health care landscape, he said.
As a result, Fink said it’s worth taking a look at when Americans are expected to start accessing Social Security benefits, usually a touchy subject that no politician wants to broach. He noted possible solutions, including either raising the age for benefits or finding ways to encourage working later.
“No one should work more than they want to,” he said. “But I think it’s a little bit crazy that our idea of the right retirement age, 65, comes from the time of the Ottoman Empire.”