BlackRock’s Fink Calls for Retirement System Rethink in Annual Letter

BlackRock Inc. Chairman and CEO Larry Fink focused his annual letter to investors on what he called a global retirement crisis, calling for a “national debate” in the U.S. and a focus on capital market investing to secure long-term savings for people globally.

In the letter released Tuesday, “Time to Rethink Retirement,” Fink argued that advances in longevity, coupled with aging populations, are making a secure and dignified retirement difficult to afford for many people around the world, including in the U.S.

Larry Fink

“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,” he wrote. “People are living longer lives. They’ll need more money. Capital markets can provide it—so long as governments and companies help people invest.”

He called on government and corporate leaders to focus on the issue of retirement, as they have other crises in the past.

“Maybe once a decade, the U.S. faces a problem so big and urgent that government and corporate leaders stop business as usual. They step out of their silos and sit around the same table and find a solution,” he wrote. “We need to do something similar for the retirement crisis. … America needs an organized, high-level effort to ensure that future generations can live out their final years with dignity.”

Every year Fink issues a letter on long-term issues he sees as impacting investors. This year’s theme followed recent retirement-related launches from BlackRock.

In February, the firm noted that 14 plan sponsors representing more than $27 billion in target-date assets have elected to use BlackRock’s LifePath Paycheck, a target-date-fund series that includes the option to purchase an annuity from insurers selected by BlackRock. In January, the firm announced a new defined contribution management program geared toward retirement plan advisement.

In October 2023, BlackRock also announced a series of TDF exchange-traded-fund investments via individual retirement accounts geared to independent and gig workers who do not have access to a retirement plan.

Longer Lives, Less Savings

In this year’s letter, Fink argued that lack of retirement security has come in part from a decline in pension systems since the 1980s, coupled with a focus on Social Security for older workers that is putting it at risk for younger generations.

“Today in America, the retirement message that the government and companies tell their workers is effectively: ‘You’re on your own,’” he wrote. “And before my generation fully disappears from positions of corporate and political leadership, we have an obligation to change that.”

Noting that he does not have an answer to the problem, Fink wrote that BlackRock would be engaging in partnerships and initiatives to come up with new solutions for retirement savings.

He went on to argue that employee savings should be easy and “almost” automatic. He referred to the newly issued iShares LifePath Target Date product intended for independent workers who do not have access to an employer plan.

For those with access to a workplace retirement plan, he called for increases to automatic enrollment and championed the SECURE 2.0 Act’s requirement that employers institute auto-enrollment for plans established on or after December 29, 2022.

Fink went on to note the retirement income conundrum, writing that “even people who know how to save for retirement still don’t know how to spend for it.”

Comparing the defined benefit system to defined contribution, he cited a “drawback” in the DC system of putting savings withdrawal on employees. Here, he referenced the LifePath Paycheck, writing that “it will one day be the most used investment strategy in defined contribution plans.”

“We’re talking about a revolution in retirement. And while it may happen in the U.S. first, eventually other countries will benefit from the innovation as well,” he wrote. “At least, that is my hope. Because while retirement is mainly a saving challenge, the data is clear: it’s a spending one too.”

Capital Markets for All

In the letter, Fink made an argument for the strength of stocks and bonds for economies—noting the U.S. economy’s resiliency stems in part from its robust capital markets, a trend other nations are following.

“In my opinion, this is the most important lesson in recent economic history: Countries aiming for prosperity don’t just need strong banking systems—they also need strong capital markets,” he wrote.

In considering the aging population in a handful of countries, notably Japan, Fink argued that governments will need to build out capital markets to help people save enough for retirement.

“By the mid-century mark, one-in-six people globally will be over the age of 65, up from one-in-11 in 2019,” he wrote, citing a United Nations report on aging. “To support them, governments are going to have to prioritize building out robust capital markets like the U.S. has.”

Retiring With Dignity

Fink opened the letter with a personal story about his parents, who he said made modest incomes as a state college teacher and shoe store owner. Even so, he noted that they had retirement savings “an order of magnitude bigger than you’d expect.”

He attributed their nest egg to putting money into investments, rather than just a bank account. He said the realization reinforced his decision to found BlackRock in part to “help people retire like my parents did.”

Later in the letter, he noted concern that, compared to 20 years ago, young Americans are 50% more likely to question whether life has a purpose, and four in 10 young Americans say it is “hard to have hope in the world,” according to a Pew Research Center study written about in The Wall Street Journal.

“Young people have lost trust in older generations,” he wrote. “The burden is on us to get it back. And maybe investing for their long-term goals, including retirement, isn’t such a bad place to begin.”

Fink noted that “more than half the assets BlackRock manages are for retirement,” with about 35 million Americans—about one-quarter of the country’s workers, as measured by the U.S. Bureau of Labor Statistics—investing in long-term savings. BlackRock is the country’s largest defined contribution only investment manager by assets, according to PLANADVISER’s most recent surveying.

The CEO also covered other topics, including public-private partnerships in infrastructure, the energy transition and energy security, BlackRock’s focus on expanding the market for ETFs, and the firm’s long-term growth strategy.