BlackRock, the world’s largest asset manager, is launching a new product in April intended to ensure Americans have enough money to retire.
In Chairman and CEO Larry Fink’s 2024 Annual Chairman’s Letter to Investors, released Tuesday, the BlackRock leader announced a new product called the “LifePath Paycheck” will go live in April.
“I believe it will one day be the most used investment strategy in defined contribution plans.”
Larry Fink
“As I write this, 14 retirement plan sponsors are planning to make LifePath Paycheck available to 500,000 employees. I believe it will one day be the most used investment strategy in defined contribution plans,” Fink said in the letter. “We’re talking about a revolution in retirement.”
Billed on the BlackRock website as a “new generation of target date products that include an option to purchase a lifetime income stream for retirement from insurers selected by BlackRock,” the product is an all-in-one professionally managed investment solution designed to help plan participants realize their retirement savings’ full potential and provide them the option to use a portion of those savings to purchase a lifetime income stream for retirement.
BlackRock said its primary objective is to balance maximizing spending, minimizing spending volatility and addressing longevity risk.
2024 letter focused on rethinking retirement
Fink urged the government and the private sector to ensure Americans have enough money to retire in his annual letter, saying it is time to rethink retirement.
“As a society, we focus a tremendous amount of energy on helping people live longer lives. But not even a fraction of that effort is spent helping people afford those extra years.”
Larry Fink
“The retirement system in America needs modernizing, at the very least,” Fink wrote. “America needs an organized, high-level effort to ensure that future generations can live out their final years with dignity… As a society, we focus a tremendous amount of energy on helping people live longer lives. But not even a fraction of that effort is spent helping people afford those extra years.”
He said the capital markets will be key to addressing this economic challenge. A “secure, well-earned retirement” is a much harder proposition than it was 30 years ago, “and it’ll be a much harder proposition 30 years from now. People are living longer lives. They’ll need more money. The capital markets can provide it—so long as governments and companies help people invest.”
Fink noted factors putting the U.S. retirement system under strain, including changing demographics (and policy not keeping up), Social Security’s well-documented challenges, and the shift from defined benefit to defined contribution retirement plans.
“Put simply, the shift from defined benefit to defined contribution has been, for most people, a shift from financial certainty to financial uncertainty,” Fink wrote, noting that even people who know how to save for retirement still don’t know how to spend for it. “Today in America, the retirement message that the government and companies tell their workers is effectively: ‘You’re on your own.’ And before my generation fully disappears from positions of corporate and political leadership, we have an obligation to change that.”
While not professing to have all the answers, Fink added he does have some data and the beginnings of a few ideas from BlackRock’s work “because our core business is retirement.”
BlackRock, which had over $10 trillion in total assets under management at the end of last year, oversees the largest retirement funds in the U.S. More than half the assets it manages are for retirement. “We help about 35 million Americans invest for life after work, which amounts to about a quarter of the country’s workers,” Fink said.
He said he thinks it’s crazy that our anchor idea for the right retirement age—65 years old—originates from the time of the Ottoman Empire. “Humanity has changed over the past 120 years. So must our conception of retirement.”
He praised the Netherlands for acting to gradually raise the retirement age to keep their state pension affordable, particularly as people today are regularly living past 90. He also praised Australia for its Superannuation Guarantee, 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 4th largest retirement system,” Fink wrote. “Australia’s experience with Supers could be a good model for American policymakers to study and build on.”
He also said it’s a good thing that legislators are proposing different bills and states are becoming “laboratories of retirement,” adding that more should consider it because the benefits could be enormous for individual retirees.
“These new programs could also help the U.S. ensure the long-term solvency of Social Security. That’s what Australia found—their Superannuation Guarantee relieved the financial tension in their country’s public pension program.”
Fink also used the letter to push for more automatic nudges to get more people enrolled and saving more in workplace retirement plans.
“As a nation, we should do everything we can to make retirement investing more automatic for workers. And there are already bright spots. Next year, a new federal law will kick in, requiring employers that set up new 401(k) plans to auto-enroll their new workers,” he wrote. “Plus, there are hundreds of major companies (including BlackRock) that have already taken this step voluntarily.”
He said firms can do even more to improve their employee’s financial lives, such as providing company matching contributions, offering more financial education, and making it easier for workers to transfer their 401(k) savings when they switch jobs.
Read Larry Fink’s 2024 Annual Chairman’s Letter to Investors
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