BlackRock’s Larry Fink Wants to Modernize the American Retirement System

In an annual letter to investors, the executive called for an urgent reshaping of how the nation approaches retirement.

Man with glasses wearing suit
Larry Fink urged a rethinking of the U.S. retirement system in his annual letter. Sean Gallup/Getty Images

With a looming crisis, the U.S. must rethink how it approaches retirement ages and defined contribution pension plans, said BlackRock (BLK) chairman Larry Fink in an annual letter to investors.

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Fink, 71, has long used his yearly reports to narrow in on specific subjects. Past letters have tackled topics like BlackRock’s approach towards sustainable investment, an approach which has drawn ire from both climate protesters who believe the asset manager invests too heavily in fossil fuels, and Republican states that argue such strategies are harmful to shareholders. But his 2024 message, published today (March 26), focused primarily on a need to modernize the American retirement system.

This is especially crucial to implement as the global population ages, according to Fink, who cited UN reports that one in six people will be aged 65 or older by 2050 compared to one in 11 in 2019. It’s also a pertinent issue for BlackRock, as more than half of its $10 trillion in assets are managed for retirement.

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

How are drugs like Ozempic playing a role?

A rise in retired Americans has put a strain on the Social Security Administration, which estimates it won’t be able to pay people their full benefits by 2034. This trend has been further exacerbated by a boom in weight loss drugs like Ozempic and Wegovy that have life-extending benefits, said Fink. While such medications are “breakthroughs,” they also underscore a “frustrating irony,” he said. “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.”

The BlackRock executive questioned whether the current American retirement age of 65 is still appropriate. While noting that “no one should have to work longer than they want to,” Fink said that “it’s a bit crazy” that the U.S. still abides by a retirement age that originates from the era of the Ottoman Empire. He pointed to the Netherlands, which 10 years ago decided to gradually raise the retirement age according to its country’s life expectancy.

A transition from defined benefit plans like pensions to defined contribution plans such as 401(k)s is also problematic, as it placed “most of the retirement responsibility from employers and put it squarely on the shoulders of the employees themselves,” according to Fink, who suggested the U.S. take a page out of Australia’s book. The nation in 1992 introduced the Superannuation Guarantee, which requires employers to put a portion of income earned by workers aged 18 to 70 into retirement accounts and has led Australia to have some of the highest retirement savings per capita in the world.

Fink also discussed how a new retirement system could help alleviate the economic anxiety of the Millennial and Gen Z generations. He cited a recent Wall Street Journal article that noted how, compared to 20 years ago, 50 percent of young Americans are more likely to question whether life has a purpose, while one in four say it’s difficult to have hope for the world. “Young people have lost trust in older generations. The burden is on us to get it back,” said Fink. “And maybe investing for their long-term goals, including retirement, isn’t such a bad place to begin.”

BlackRock’s Larry Fink Wants to Modernize the American Retirement System