Larry Fink, CEO of BlackRock Inc. warned of a looming “retirement crisis” facing the US and called on baby boomers to help younger generations save enough for their own future.
That, he said, will prevent them from becoming so become disillusioned with capitalism and politics in the coming years.
As people live longer but struggle to afford and plan for it, Fink used his annual letter as chairman of the world’s largest asset manager to urge business leaders and politicians to pursue “an organized, high-level effort” to to reconsider the pension system. More than half of BlackRock’s $10 trillion in client assets are managed for their retirement.
“It is no wonder that the younger generations, Millennials and Generation Z, are so economically concerned,” Fink wrote in the letter to BlackRock investors on Tuesday. “They believe that my generation – the baby boomers – has focused on their own financial well-being at the expense of who will be next. And when it comes to retirement, they are right.”
Young people “have lost confidence in older generations,” Fink wrote. “It’s up to us to get it back. And perhaps investing for their long-term goals, including retirement, isn’t such a bad start.”
Fink said members of the boomer generation in positions of business leadership and politics have an obligation to help fix the system, and he questioned whether age 65 should still be the conventional idea of when people retire. Individuals are eligible for Social Security benefits as early as age 62, and those born after 1960 are considered to have reached full retirement age at age 67. Medicare health insurance coverage begins at age 65.
“No one should have to work longer than they want to,” Fink wrote. “But I find it a bit strange that our anchor idea for the correct retirement age – 65 – dates from the time of the Ottoman Empire.”
By mid-century, a sixth of people worldwide will be over 65, up from 1 in 11 in 2019, Fink said, citing United Nations data. Nearly half of Americans between the ages of 55 and 65 had no money in personal retirement accounts, he said, citing 2022 U.S. Census data.
“The federal government has prioritized preserving benefits for people my age (I’m 71), even though this could mean that Social Security will struggle to meet all obligations as younger workers retire,” wrote Fink.
Fink said BlackRock will announce a series of partnerships and initiatives in the coming months to answer key questions, including the average retirement age and how to encourage older Americans to keep working if they want to. The decline in defined benefit pensions has also made it harder for people, including those who have been conscientiously saving themselves, to understand how much they can spend in retirement, he added.
“The shift from defined benefits to defined contributions has been a shift from financial security to financial insecurity for most people,” Fink said.
Increasing criticism
In the more than a decade since Fink began writing high-profile annual letters to corporate executives and shareholders, BlackRock client assets have grown to more than $10 trillion, with significant stakes in companies, private assets and bond markets around the world. The letters, typically published at the beginning of each year, have given Fink and company a powerful voice on social and political issues – and have drawn increasing criticism from all quarters.
This year’s focus on retirement highlights a core part of BlackRock’s investment business since its inception in 1988 and follows several years in which Fink used his letters to urge more action on global warming, then to protect himself – and the company – in crisis. political maelstrom.
Climate change advocates say the company is not taking strong enough action, while Republicans criticize Fink and BlackRock for allegedly hurting fossil fuel states and promoting “woke” capitalism. Earlier this month, Texas officials said they would divest $8.5 billion in school finance funds from BlackRock and criticized the company for hurting energy interests in the state.
Fink said he has stopped using the term ESG and has focused on the company’s partnerships with energy companies over the past year. BlackRock has scaled back its participation in international climate investment alliances and given clients more control over how their stocks are voted on at company meetings, rather than relying on the money manager’s vote.
In the letter, Fink said he is now focusing on “energy pragmatism.” Decarbonization and the transition to clean technologies will take time, he said, and countries increasingly want to ensure they have reliable and secure access to energy sources, especially after Russia’s invasion of Ukraine.
BlackRock has invested more than $300 billion in traditional energy companies and $138 billion in energy transition strategies, he said.
More comments on Fink’s letter:
- The US government debt situation “is more urgent than I can ever remember,” and the 3 percentage points extra interest the US government now has to pay on 10-year government bonds compared to three years ago is “very dangerous.”
- Private partnerships with governments are how major infrastructure projects will be built in the future, and BlackRock’s $12.5 billion acquisition of Global Infrastructure Partners positions the company to grow in the sector.
- BlackRock is “extremely excited” about the business opportunity for the firm’s bond managers, given the rise in yields after 15 years of low rates and as clients reconsider their fixed income allocations