BlackRock CEO Says Concept of Retirement Has to Change

Larry Fink, chairman and CEO of asset management firm BlackRock Inc., launched a broad appeal for reforming the U.S. system for building retirement savings, saying it “has never been more urgent.”

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.

“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 addressed 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.”

Fink highlighted the need for the U.S., and other countries, to reconsider the concept of retirement and related public policies in light of increasing life expectancy. He also outlined the investment options and structures his firm has developed to help address the issues.

“When people are regularly living past 90, what should the average retirement age be?” Fink asked rhetorically in the letter. But he noted it will be important to encourage people who want to work longer to be able to do so, rather than requiring it.

Acknowledging that work has changed since the heyday of defined benefit pension funds, Fink wrote that defined contribution plans, such as 401(k) plans, were intended to help a more mobile workforce, “but in practice? Not really.”  Problems with the move to defined contribution retirement systems, Fink wrote, include that they force retirees “to trade a steady stream of income for an impossible math problem.”

In his letter, Fink pointed to his parents’ modest incomes and noted that when reviewing their retirement savings, he saw they were a magnitude better off than their combined incomes. The reason: their investments.

“My dad had always been an enthusiastic investor,” Fink wrote. “He encouraged me to buy my first stock (the DuPont chemical company) as a teenager. My dad invested because he knew that whatever money he put in the bond or stock markets would likely grow faster than in the bank. And he was right.” 

Fink noted that he and his partners founded BlackRock in order to help people retire like his parents did, and that participation in capital markets is crucial for people to retire comfortably and financially secure.

“My parents lived their final years with dignity and financial freedom,” Fink continued. “Most people don’t have that chance. But they can. The same kinds of markets that helped my parents in their time can help others in our time. Indeed, I think the growth- and prosperity-generating power of the capital markets will remain a dominant economic trend through the rest of the 21st Century.”

Fink also noted that “as populations age, building retirement savings has never been more urgent.” Yet, while medical and pharmaceutical breakthroughs are making it possible for people to live longer, “not even a fraction of that effort is spent helping people afford those extra years.”

Fink also stressed the importance of 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.

This year’s letter also 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. He also noted 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 the burden of savings withdrawal on employees and 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.”