Blackrock founder Larry Fink reflects on ageing population, superannuation

Living longer has a myriad of flow-on issues from a social perspective, including how this affects younger generations. The discord that has emerged between the relatively prosperous generation of Baby Boomers and the younger generations has been well documented.

Fink says Millennials and Gen Zs are economically anxious. There are two obvious reasons: the first is that the younger generations are now the economically productive members of the workforce that are carrying the burden of supporting a growing number of economically unproductive retirees.

Secondly, in generations past, retirees would have died earlier and passed what assets remained on to their children. Now, as people are dying later, they will use more of their savings to support themselves and leave less to their children, who may not inherit until they are middle aged.

“It’s no wonder younger generations, Millennials and Gen Z, are so economically anxious,” Fink says. “They believe my generation – the Baby Boomers – have focused on their own financial wellbeing to the detriment of who comes next. And in the case of retirement, they’re right.”

Today in America, for those still working, the retirement message the government and companies tell their workers is effectively: “You’re on your own.”

Fink says the Baby Boomers that are still in positions of corporate and political leadership have an obligation to change that.

One result of all of this is an increasingly disillusioned cohort of younger people. Fink says no single piece of data has disturbed him more than that contained in a piece in The Wall Street Journal that said the current cohort of young Americans is 50 per cent more likely to question whether life has a purpose, while 40 per cent agreed with the statement that it is hard to have hope for the world, compared with 20 years ago.

The lack of retirement savings is a scourge for the US economy, and Fink’s message is to think about pushing out the retirement age from 65 or having a better system of enabling workers to save incrementally during their working life to fund their retirement.

Here Fink acknowledges the gold standard Australian superannuation model and the Netherlands’ more fluid response to demographic change.

The Dutch decided more than 10 years ago to gradually raise the retirement age. It will now automatically adjust as the country’s life expectancy changes.

In Australia, employers must contribute a portion of income for every worker between the ages of 18 and 70 into a retirement account, which then belongs to the employee. The Superannuation Guarantee was introduced in 1992 when the country seemed like it was on the path to a retirement crisis.

Thirty-two years later, Australians likely have more retirement savings per capita than any other country. The nation has the world’s 54th-largest population, but the fourth-largest retirement system.

“Australia’s experience with super could be a good model for American policymakers to study and build on. Some already are,” according to Fink.

Needless to say, if the US had a national retirement system like ours, BlackRock’s $15 trillion under management would stand to get a lot larger.

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