Tuesday, April 18, 2017

Larry Fink on Retirement

I'm not a personal friend of Larry Fink, but I have met the guy.  He's disciplined and thoughtful, as you would expect the founder and CEO of Black Rock to be.  His firm manages more than $5.1 trillion for investors of all types.

Anyway.  Fink sat for a long interview that was published in Bloomberg today.  You can read the whole thing here, but be prepared to spend a lot of time on it.

One thing he said is that we are failing to plan for retirement.  He's been banging this drum for a while now, and good for him.  People need to hear it and to act.  From the interview:

       We don’t spend enough time as a society understanding how bad the retirement 

       system is in this country. I think much of the anger in this past election is based 
       on people’s fear of their future. 

       People are frightened; they know they haven’t saved enough money for retirement. 

       They’re going to be highly dependent on Social Security—which, if that’s the only 
       source of income, means living in poverty. 

       In addition, the bigger problem many of our cities and states are facing is that their 

       retirement plans are defined-benefit plans. Their liabilities are so large, and 
       increasing, especially as we transform deadly diseases into chronic ones. 

       That translates into greater longevity and -- you’re witnessing it every day as an

       American -- underspending on our infrastructure. It’s a direct cause of the (poor) 
       financial positions of state and local governments. 

       And it’s only going to get worse.

       I believe the recognition of our precarious retirement position is one of the most

       underappreciated future crises in this country. 

       I think this crisis is going to be much bigger than health care. Health care is 

       immediate. If you don’t have proper health care, it is today’s problem. But as 
       you know -- investing, the whole concept of compounding -- if you’re not building 
       your nest egg year after year after year, you’re not going to have enough savings to 
       retire with dignity.

As Citizens

I spend time in two states whose leaders have been ignoring the public aspect of the retirement problem for years.  In time, as more public employees collect pensions, those expenses will crowd out funding for education, highway maintenance, police departments and other functions that we now take for granted.  Both states need to make plans instead of hoping the inevitable will not come to pass. 

The time to act on this was a generation ago, but doing something today is better than waiting until tomorrow.  We need to hold our politicians to account, which is uncomfortable for them but necessary nonetheless.

As Individuals

It can be hard to tell people to save for the proverbial rainy day, but it has to be done.

We need to save and to tell our children to save, starting as soon as they get jobs.  If your children aren't investing in Individual Retirement Accounts, give them the money as birthday presents and make them open IRAs.  They'll thank you later, or at least remember you fondly for this.  

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