The chief executive of the world’s largest asset manager is warning of a future “retirement crisis”, as pension savings fail to keep up with life-extending medical breakthroughs.
In his annual letter to investors, the BlackRock chief executive, Larry Fink, said that establishing “a secure, well-earned retirement” would be one of the greatest economic challenges to face the US in the mid-21st century.
The boss of BlackRock, which manages about $10tn (£7.4tn) in assets, including retirement funds, praised medical advances, including obesity drugs such as Wegovy and Ozempic, that he said could be life-extending for some people.
However, he said the same efforts had not extended to financial planning for longer lives, with one in six people worldwide expected to be over 65 by 2050. That compares with one in 11 in 2019.
He noted that Brazil would have more people leaving its workforce than entering it by 2035, while Mexico would reach peak workforce by 2040. India would do the same in about 2050.
Fink’s annual letters are closely followed, touching on big topics including sustainability and stakeholder capitalism.
He predicted that America’s ageing population would put the US retirement system under “immense strain”, with the social security administration saying that it would not be able to pay people full benefits by 2034.
“These drugs are breakthroughs. But they underscore a frustrating irony: as a society, 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 said.
“As populations age, building retirement savings has never been more urgent,” he added. “This is a much harder proposition than it was 30 years ago. And it’ll be a much harder proposition 30 years from now.”
The chief executive said that investments through financial markets would be a key part of the solution which, in turn, would require state backing. “People are living longer lives. They’ll need more money. The capital markets can provide it – so long as governments and companies help people invest.
“To support them [retirees], governments are going to have to prioritise building out robust capital markets like the US has.”
He also suggested raising the retirement age beyond 65 – an idea he said “originates from the time of the Ottoman empire” – and introducing schemes similar to the Australian superannuation guarantee, under which employers contribute a portion of income for every worker into a retirement account.
He said that 32 years after Australia introduced the retirement savings programme in 1992, its citizens “likely have more retirement savings per capita than any other country. The nation has the world’s 54thlargest population, but the fourth largest retirement system”.
The UK began phasing in its own auto-enrolment pension scheme, designed to ensure all workers have a private pension to add to their state pension, in 2012.
Fink touted BlackRock’s products, which he said could help guarantee savers stable payments from their retirement pot every month.
Ultimately, young Americans would struggle to hold out hope for their future without more certainty over their finances, Fink said. “If future generations don’t feel hopeful about this country and their future in it, then the US doesn’t only lose the force that makes people want to invest. America will lose what makes it America.”
He added: “Without hope, we risk becoming just another place where people look at the incentive structure before them and decide that the safe choice is the only choice. We risk becoming a country where people keep their money under the mattress and their dreams bottled up in their bedroom.”