Urges U.S. Government, Business Leaders to Make Retirement Funding
Crisis a National Priority
Calls for a Comprehensive Solution Including Gradual Adoption of a
Mandatory Retirement Savings Program and Policies That Encourage
Retirement Saving
NEW YORK--(BUSINESS WIRE)--
BlackRock, Inc. (NYSE: BLK) Chairman and Chief Executive Officer
Laurence D. Fink today called on government and business leaders to
recognize that Americans are woefully unprepared for increasing
longevity, and said policymakers should make resolving the resulting
retirement funding crisis a national priority.
In a speech to students and faculty at New York University Stern School
of Business, Mr. Fink noted the great progress made in achieving longer
lifespans but added that this blessing is severely straining resources
for governments and individual investors worldwide, and also may be
restricting job opportunities for younger people as older people remain
in the workforce longer. Click
here to view a webcast of Mr. Fink’s remarks.
“Longevity is the defining challenge of our age,” said Mr. Fink, who
noted that one in four Americans age 65 today is expected to live until
the age of 90. He said the traditional mix of retirement funding from
Social Security, pensions and personal savings was in the grip of “a
systemic crisis that is threatening not only retirement systems but also
our economic futures.”
“Because of its far-reaching effects, a solution needs to be as big and
urgent a national priority as anything we have faced in recent years.
The longer we wait to act, the bigger the problem will become,” Mr. Fink
said.
To help meet this challenge, Mr. Fink called for a comprehensive
solution that, in addition to Social Security, includes some form of
mandatory retirement savings, similar to Australia’s superannuation
system or the new National Employment Savings Trust in the UK. Calling
for the gradual introduction of such a provision, Mr. Fink said, “It
would relieve the crisis of financing longevity that will be a drag on
our economy and job creation for years to come if we don’t deal with it
soon.”
Mr. Fink also said that corporate America has a “moral obligation to
help employees prepare for retirement” and urged more employers to offer
retirement plans, provide matching funds, auto-enroll all employees and
“educate employees on the absolute necessity of maxing out their plans.”
He said that BlackRock and other asset managers needed to do a “better
job” of helping prepare savers for retirement. “That means much less of
a focus on short-term sales and products – and more on investors’
long-term needs,” Mr. Fink said.
Mr. Fink spoke as BlackRock published its latest Investor Pulse Survey – “Investing
in a Low-Yield Environment” – which found that while more than half
of respondents fear they will outlive their savings, some 73 percent are
more concerned about keeping their savings “safe” than generating the
returns they will need to fund retirements that are now lasting up to
three decades or more.
“We’re not going to change human behavior, but we need to find ways to
influence it. Investors don’t take a long-term view. They are too
concerned about all the noise out there, all the ups and downs in the
markets,” Mr. Fink said, citing behavioral studies on risk aversion
among individual savers.
“That noise – and the concern people have about outliving their savings
– are ironically driving investors to investments they perceive to be
safer, like traditional bonds,” Mr. Fink said. “But they should do just
the opposite, taking advantage of their longer investment horizon to
keep their money working for them.”
The Old Rules of Investing “Won’t Work”
Pension plans and individuals have long used traditional government
bonds to help fund retirement obligations. “That worked for 30 years of
falling inflation and interest rates and eight percent returns on
Treasuries. But it doesn’t work today when the 10-year Treasury yields
less than two percent. And the very real risk is that people
over-allocating to traditional bond funds are going to lose money when
interest rates rise,” Mr. Fink said.
“The old rules of investing – 60 percent equities, 40 percent fixed
income and an increasing share of fixed income the closer you got to
retirement – won’t work today,” Mr. Fink added.
“As an industry, we need to measure our performance not against
benchmarks, but against investors’ objectives or liabilities,” Mr. Fink
said. “Investors don’t care if a fund holds mid-cap stocks or Mexican
government debt. Investors want products that will provide long-term
outcomes to help buy a house, send a kid to college or fund a decent
retirement,” Mr. Fink said.
About BlackRock
BlackRock is a leader in investment management, risk management and
advisory services for institutional and retail clients worldwide. At
March 31, 2013, BlackRock’s AUM was $3.936 trillion. BlackRock offers
products that span the risk spectrum to meet clients’ needs, including
active, enhanced and index strategies across markets and asset classes.
Headquartered in New York City, as of March 31, 2013, the firm has
approximately 10,600 employees in 30 countries and a major presence in
key global markets, including North and South America, Europe, Asia,
Australia and the Middle East and Africa. For additional information,
please visit www.blackrock.com.
BlackRock, Inc.
Brian Beades, 212-810-5596
Brian.Beades@BlackRock.com
or
Lauren
Post, 212-810-3665
Lauren.Post@BlackRock.com
Source: BlackRock, Inc.