BlackRock Chief Executive Larry Fink raised the specter of the “silent crisis” of retirement facing the global economy as increased longevity makes issues such as higher housing and healthcare costs for retirees more daunting.
In his closely watched annual letter, Fink, the co-founder of the $8.6 trillion money manager
said “investing for a financial goal like retirement is an act of hope and optimism, demonstrating a long-term perspective, trust in financial institutions, and belief in the integrity of the market.”
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Fink pointed to lower market-return expectations, higher housing and healthcare costs for retirees, and the shifting of retirement risks to individuals as factors making it difficult to support increased longevity.
Fink said some of the issues driving the retirement crisis include populations in Europe, North America, China, and Japan that are aging due to increased lifespans and falling birthrates. In the U.S., for example, 10,000 people turn 65 every day.
“This has profound implications for each of these markets over time. It will result in a smaller working population and cause income to grow more slowly or even decline,” Fink said.
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Another challenge is understanding why some people can save and invest effectively for retirement and others cannot, even in wealthier countries.
“In some countries people are actually over saving but under-investing. If they are keeping their money in the bank rather than investing in the market, they won’t generate the returns necessary to retire with dignity,” Fink said. “In order to retire comfortably, people need to invest their savings over decades and take advantage of the long term returns delivered by the growth of the capital markets.”
Long-term investing for goals such as retirement requires trust and optimism, Fink said.
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“Long-term investing requires trust in the financial system and a fundamental belief that tomorrow will be better than today. We need leaders today who will give people reasons to be hopeful, who can articulate a vision for a brighter future. And, we need institutions that inspire trust,” Fink said. “So much of what we have lost over the past few years – through Covid, war in Europe, political polarization, geopolitical fragmentation, and macro-economic shifts – has eroded optimism, trust, and a belief in a better future.”
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Fink pointed to issues that have eroded confidence such as fear about economic security, fear about what world the next generation will inherit and fear of how the economic and political landscape will shape the future.
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When people are afraid, they may save money, but they won’t invest unless they have hope for the future and believe in the integrity of financial and regulatory institutions, he said.
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“But I remain an optimist. The world has faced major crises before. We got through them by confronting problems, imagining a better future, creating connections, and driving innovation forward. We need to do the same today. Our job as leaders is to show people how to see in challenges opportunities that can be captured,” Fink said.