Retirement ‘Crisis’ Calls for New Thinking: BlackRock CEO
This story previously ran on Financial Advisor IQ’s sister publication FundFire.
BlackRock Chief Executive Officer Larry Fink warns that the world is facing a “retirement crisis” that requires new thinking on pensions, work and the medical breakthroughs that prolong life, the Financial Times reports.
In his annual shareholder letter on Tuesday, Fink cited the United Nation‘s projections that one in six people globally will be older than 65 by 2050, up from one in 11 in 2019.
“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 wrote in his almost 6,000-word missive.
In the U.S., more must be done to address high levels of despair among young people, Fink wrote. “If future generations don’t feel hopeful about this country and their future in it, then the U.S. doesn’t only lose the force that makes people want to invest. America will lose what makes it America,” he wrote.
Fink, 71, called on baby boomers to help younger people save for their own futures which may, in turn, prevent them from becoming disillusioned with capitalism and politics, Bloomberg reports.
“It’s no wonder younger generations, Millennials and Gen Z, are so economically anxious,” Fink wrote. “They believe my generation – the baby boomers – have focused on their own financial well-being to the detriment of who comes next. And in the case of retirement, they’re right.”
The rise of defined contribution pension plans has also added to the strain on social security programs, leaving the U.S. particularly unprepared for a huge increase in its retiree population.
“Today in America, the retirement message that the government and companies tell their workers is, effectively: ‘You’re on your own,'” the head of the giant asset manager said.
More than half of the $10 trillion in assets managed by BlackRock are for retirement. The key to a comfortable retirement is getting people to invest more of their assets in capital markets, The Wall Street Journal reports.
“No other force can lift more people from poverty or improve quality of life quite like capitalism,” he wrote.
On other issues, Fink wrote that he is now focused on “energy pragmatism.” BlackRock has more than $300 billion invested in traditional energy firms and $138 billion in energy transition strategies, Bloomberg reports.
Fink, who visited 17 countries last year, said that global politicians and businesspeople are planning to invest in both traditional fuels for energy security and green power for the energy transition.
“These leaders… were far more pragmatic about energy than dogmatic,” Fink wrote. “Nobody will support decarbonization if it means giving up heating their home in the winter or cooling it in the summer. Or if the cost of doing so is prohibitive,” the FT reports.