Today’s overlapping economic headwinds — from inflation and market volatility to geopolitical conflict — are straining our retirement system. And for the first time in years, retirement confidence has dipped.
Still, BlackRock believes it’s possible to build a future where every American can retire with dignity on their own terms. But to make that vision a reality, the retirement industry needs to focus on building resiliency. All of us — investment firms, advisors, policymakers, employers and more — must do our part to help America’s retirement system stand stronger in the face of volatility and uncertainty.
That’s why BlackRock is leading wide-ranging discussions about what resilient retirement solutions for the future could look like. Our recent Retirement Forum and other conversations with partners have revealed key three insights:
1. Resilient solutions should account for a changing global and market outlook
Recent years have provided a stark reminder of how crucial it is for America’s retirement system to be able to withstand — and even grow stronger amid — unexpected upheaval. Today’s new market regime could present periods of higher risk and volatility for retirement savers. The retirement industry must adjust to this new environment and help savers achieve their retirement goals.
As BlackRock Chairman and CEO Larry Fink pointed out at the Retirement Forum, one priority should be offering solutions that instill discipline and a long-term mindset— even in the midst of volatility. Options that are adaptable and designed for our changing world, as well as focused on providing long-term security, can give savers the confidence to stay the course and keep saving.
As Larry put it: “If you have optimism that your retirement is secure, you have optimism for your future.” Now more than ever, taking the long-view matters.
2. Resilient solutions should account for people living longer and last for them
Thanks to advances in medicine and improvements in public health, Americans can expect a longer retirement. And longevity is something that should be celebrated — not feared as an affordability crisis.
Sixty-four percent of all savers are concerned about not having enough savings to last through retirement according to BlackRock’s 2022 Read on Retirement survey. As recent conversations at our Retirement Forum made clear, we need to help retirees feel more confident spending down their savings once they are retired.
There is a crisis of confidence that resilient retirement solutions can help ease. Retirees, who’ve worked hard and saved throughout their careers, should have access to options that can provide a stream of guaranteed income throughout retirement and account for spending preferences and behaviors. Americans need to trust that their retirement income solutions will help them spend sustainably without running out of money.
3. Resilient solutions should address disparities in retirement savings across different groups of employees, and evolve to meet changing participant needs
Many diverse groups — particularly people of color — face additional obstacles with retirement savings. There is a 7-to-1 retirement savings gap between Black and white Americans and a 5-to-1 savings gap between Hispanic and white Americans.1 It is critical for our industry to better appreciate and address these gaps.
Plan sponsors may need to look at providing more equitable support. One way to do this is with an updated focus on plan design analysis based on population characteristics — a useful tool to optimize retirement plans for the different demographics and characteristics of plan participants.
More targeted outreach and education could also help close the gap, as well as a focus on providing emergency savings solutions. Doing so can help participants can experience greater confidence in the near-term and allow for additional focus on the long-term.
Working Together
As we reflect on our conversations at BlackRock’s Retirement Forum 2022, as well as other recent engagements we’ve had with industry colleagues, we’re more certain than ever that there has never been a more important time to focus on resilience in retirement. The world never stops changing, and if recent history is any indication, those changes will continue.
To build a more resilient retirement future for all — one where all Americans can retire with dignity on their own terms — it’s going to take an all-hands-on-deck approach. As Head of BlackRock’s Retirement Group Anne Ackerley has said, “While the challenges and obstacles we are facing in retirement are complex and entrenched, this moment also presents opportunities for innovation and progress – particularly if we all work together.”
1 | Social Security is a Great Equalizer. Center for Retirement Research at Boston College. January 2020. Number 20-2. https://crr.bc.edu/wp-content/uploads/2020/01/IB_20-2.pdf
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