BlackRock’s Fink on Clear-gash the device to Solve the Retirement Grief

It's a bit of a different, I think,letter from what you've done before. Personal starts with your parents.Right. And their earning.Saving for retirement and includes your grandkids as well.Yes. The retirement crisis.Give us your diagnosis of that problem right now.Well, it's something I've been writing about for years, but I emphasize it inthis letter. And, you know, all my letters are havebeen based on some long term issues. And let me be really truthful about myletters.

My letters are a reflection of myconversations with clients. So it is and it's over the past year, Iheard more and more conversation about retirement or retirement crisis frommany parts of the world, from middle class developing countries to developedcountries. The acute problem here in the UnitedStates is that we have still 57 million Americans who who don't have any savingsor any retirement plan. Social Security is a fantasticfoundation for retirement. But if that's all you have when youretire, you're you're going to be living in a in poverty below the poverty linebecause it just is.

It's supplemental, but it's not meant tobe the totality of what you have in a retirement.And the whole concept of we're aging, we're you know, we're all living longer.And I think one of the big narratives of has to reflect in 2023 was the miraclesof medicine. When we talk about the drugs, like wasunpacking all the different weight loss drugs, how that is extending life.It's it's conquering kidney disease and liver disease and heart disease andjoint disease. And it's and then there are newmedicines now for for dementia that extends life.So if you think about the miracles of.

Technology and how it transforms ourlives and extends our life, there is not a dialogue in America or most placesabout can we afford that longevity? And our entire retirement system wasbased on statistics that were created 50 years ago whereby most Americans retiredbetween 60 and 62 then, but most Americans passed away at 67.And today, statistically a couple 60 years old, in good health, one of themis going to live over 90. And so the other question is, should were-evaluate how we work and how long we work?Because we all need purpose in life. And in most places, most people get findpurpose, obviously, maybe with their.

Grandchildren, their children, theirtheir community. Many people find purpose in their intheir jobs. And the thought of retiring at 60 with30 more years or a third of your life, your life in front of you.This we need to have a dialogue. We need to have a conversation.And, you know, I'm an optimist. I am a very optimistic about the longterm vitality of our markets. I'm bullish on capitalism.The reason I'm bullish is that when I read the newspapers every morning andlisten to Bloomberg and other news organizations,it's full of scary things.

We talk about the problems, we talkabout all the problems, but we solve problems through conversation.And the one area where we have no conversation is, is the affordability ofretirement and the whole concept of retirement.And we need to start a global and most importantly, a national dialogue.So in your letter, you have a very powerful, I think, diagnosis of theproblem, not just the United States, but globally.Yes, we need we're living longer. We need more money, therefore, to liveat the same time. And there's also a bit of a patternthere to capitalism.

Absolutely.Capital markets and the extraordinary things they've done, What they can do isconnect the two of those up. Could we use the capital markets toaddress at least some of the problem or talk about And let me be very specific.Social Security, you mentioned, is really in trouble.Should we be taking the Social Security trust fund, what's left of it, and putit into capital markets? We need to put it in a long terminvestment. I mean, we have a system of pay as yougo. Okay.There are other countries like Australia.

That have a whole unique system wherebyyou're contributing. But there are right now in Congress, anumber of senators and congressmen are talking aboutrehabilitating our Social Security pool and maybe contributing a big block ofmoney into it. So it has sufficiency.But to me, as I said, Social Security is just a foundation of retirement.We need to really educate our citizens about the need for savingswe see worldwide. Most people who are really thrifty, theykeep most of their money in a bank account, like in Japan.Almost.

There's a high savings rate of 18%.Most of that is in a bank account. In Europe, there's a high savings rateof 15 ish percent. Most of that's in a bank account that isnot going to provide you the adequacy of the compounding or what capital marketscan do. But probably one of the bigconversations I've had with so many political leaders is the connection ofretirement and the capital markets. When you think about the vitality of theUS capital markets so much, it's based on the long term money of pension fundsof of our whether it's a defined benefit plan or defined contribution plan.And Americans are more optimistic.

And so we have a higher investment inequities beyond any other society.And so in my conversation with many political leaders, as we think aboutretirement and Japan is a great example, the Kishida government just this pastOctober raised the amount of tax deductibility to put in your 41k, theydoubled the size. And it's not a coincidence that theJapanese equity market since October is up 30%.And it's because we're seeing more and more money that is going into the longterm capital markets. So not only does it give a financialreturns for those who are retiring and.

Saving for retirement, but it's a bigfoundation for domestic companies to have local investing intheir own companies. If you look at the United States, ourequity markets generally treated a 2 to $0.03 e ratio higher than any place inthe world. Now, you could argue we have bettercompanies in any other place in the world, but you also have to attributethis to that. We have a larger retirement system interms of what we invested. Now, that doesn't mean we need and weneed more we need more money for more people to be putting it into theirsystem.

Take it a step further because somethingyou're very involved in BlackRock is is alternative investment in the privatemarkets, credit debt, things like that. Should we be changing the rules so wecan put our for one case or IRAs into private markets?I believe there are some great areas of private markets that are goingto be great investments for retirement, and I would channel that more towardsinfrastructure because infrastructure is has a long maturity.It has a higher coupon, but it has a lower profile of returnsthan what I would say, other areas of the private market.So it has a more a good corridor of.

Returns, but higher probabilities ofmeeting those returns. And so, yes, we need to be relooking athow we think about investing, whether that is going to be in private equity orinfrastructure. I do believe we need to be putting morelong dated assets into retirement and so that you could so that you could meetthe returns that you need to have the pool of money that you acquire duringduring retirement. Something else you mention was ourlongevity, which has increased substantially.We all benefit from that. It's a blessing thing, a complaining atthe same time.

Should we be encouraging, as yousuggest, to let our people working longer?Should we making a possible facility? Should we frankly increase the age forSocial Security? That is not for me to make a decision,but I think we need to have a conversation.Look, you and I are the same age. Okay?We're working longer. We have find purpose in what we do.The founder of Bloomberg, Mike, is still working,I believe. I believe for those who can and theyfind purpose in work.

My gosh.Work as long as you can. If you find blessings, if you findpurpose and other thing, do that. But I do believe we need to discussthese opportunities. I don't think the average citizen knowsthat you know, the extent of how much longer we're going to be able to live.You know, so the the beauty and the miracles of medicine has allowed us tolive in, you know, ten, 15, 20 years longer than two generations ago.And and so but we haven't changed our system of retirement or our system ofSocial Security. So the most important thing we need todo, David, is have a conversation.

And and to that conversation, I thinkmost people are going to elect to do things.They'd be working longer were electing to be moreto be more involved in how they put their money to work for retirement.As I say in your letter, you talk a lot about the success of the capitalmarkets, all that they've accomplished. At the same time, you do mention theproblem with particular US debt. You think it's more or.Urgent than any time. I think you said you can remember inyour lifetime. Put those two things together.To what extent has the success of the.

Capital markets come specificallybecause we've taken more debt on the public balance sheet?We've shifted debt from private balance sheets to public balance sheets.No question. But let's just use a statistic that Ithink when I talk about this statistic, I get frightened.In the year 2000, the US deficit was $8 trillion.Today, it's $34 trillion. So 23 years later, we increased ourdeficit by $26 trillion. So for the first 230, 40 years.We increased our deficit to 8 trillion. And in the last 23 years, we went we weincreased it by $26 trillion.

I think that speaks volumes of what'shappening in our in our in our country today.The problem with these tepid deficits is and now with and I believe, higherinterest rates for longer. The cost of financing our deficits aregoing to erode more and more of our of our disposable income as a country.And I do believe they're we're getting to a point where our public debt isgoing to start up crowding out private capital and we're going to havestructurally higher interest rates. What can the private sector do totrigger some action in that regard? I mean, you're the head of the largestasset manager in the world, Larry Fink.

It's not just you, but you have someinfluence. At this point, we have candidatesrunning for president who are even talking about this, not even theconversation. Soin my letter, I talk about the need for more public private investments.But the United States is one of the last countries where we've had privatecapital investing and in our infrastructure.And I believe if we changed our policies, privatized our airports andprivatized maybe our ports and having private capital investing that, then ourpublic spending could be rededicated to.

More urgent social needs, more urgentneeds. Elevating her education, elevating, youknow, our, you know, issues around Social Security and health care.And so I believe the need is to rethink what is the role and responsibility ofthe public sector for the development of better 21st century infrastructure.We know that we are going to have to digitize our entire economy.We know we're going to have to move forward on decarbonization.These require huge pools of money. Allow the private sector to be part ofthat. We have this enormous functional capitalmarkets that can provide the capital we.

As a country must use it more often andaccess the role of private sector. And so I think we stillyou know, that does not change the course of our deficits, but we cancertainly reallocate some of our monies into more urgent issues.And I would say and my letter speaks about itto we need to grow our economy. So our deficits are a smaller componentof our GDP. That is the bigger issue.If our if we continue to just grow at 2% and we have these type of deficits,that's when the deficits really are going to be a problem out five and tenyears, which you suggest 3%.

Is that realistic?We need that has to be our target. We need to find ways of growing at 3%instead of just cutting taxes. Or we need to find ways of incentingprivate capital to be investing more. We need to encourage growth and we needto be. And this is a debate now, and there's alot of people talking against us. We need to embrace our capitalismbecause our capitalism has shown to be the best economic force in the world.And finally, let me go back to the personal here for a moment.As you mentioned, you and I happen to be exactly the same age, right?We're boomers.

Yes.We have some responsibility to the succeeding generations that I'm not surewe deliver. How much of your letter was reallysaying to us, boomers, we owe it to our children, our grandchildren to get ourarms around these problems. We were born at a great economic moment.It's that we all have a responsibility to try to recreate that environment forour grandchildren and hopefully make a better outcome for our children.But now, at our age, we've got to be focusing on the future for ourgrandchildren.

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