Americans in general seem to dislike being told what to do. The firestorm against President Obama’s Affordable Care Act, which requires all Americans to carry health insurance policies, has been unavoidable. But still, BlackRock Inc.’s CEO thinks that Americans need to be forced into saving for their retirement. It certainly is easy not to save for retirement, especially when many Americans are struggling just to make ends meet. Retirement seems far away and there is a chance that we won’t even live that long. But chances are better that we will and not having the proper retirement savings can be catastrophic. Fortune’s Katie Benner told us about “Larry Fink’s radical retirement recommendation” in a CNN Money article last month.
On average, retirees plan on Social Security covering 70% of their expenses in retirement. But there is simply not enough money coming into Social Security to meet the needs of the Americans retiring on a daily basis. When Social Security was first introduced, a 21 year old male only had a 50% chance of living until he was 65. Chances are good today that he will live well into his 80’s. And while the Social Security system is struggling, not enough Americans are taking their retirement savings into their own hands. One-third of Americans don’t have any retirement savings. Many of those who are saving have less than $25,000 saved. Fink believes that one of the biggest challenges in this generation is that people are living longer, but have retirement savings that are grossly underfunded.
Much like what has already been done in Australia and Chile, BlackRock’s CEO suggests that the government in America should require mandatory retirement savings just like they require people to pay into Social Security. He says that this socioeconomic issue is being ignored and calls for politicians and business leaders to work on addressing this crucial issue. In a speech to NYU finance students, Fink pointed out that the finance industry is too focused on short-term goals and gains, while they need to start focusing more on long term objectives.
I found it interesting that he called out corporations and asked them to work harder to help their employees save for their retirement. As pensions become nearly nonexistent and saving is changed to 401k’s, Fink says that the employer still maintains what he refers to as a “moral obligation” to make sure their employees are saving for retirement. Do you agree with that? I think it is wonderful when companies encourage their employees to save for retirement, especially when they match 401k contributions. The future will be a lot brighter if more companies help to educate employees on saving, match their funds, and even auto-enroll them in retirement plans. He says that investors don’t really care where their money goes, as long as it is helping them meet their future financial goals. It’s the job of us as individuals, employers, and the finance industry to take care of our retirement financing. Do you think the government needs to get involved? Let us know.
Written by Rachel Summit