If you work at a Fortune 500 company, you have the tools to prepare for retirement. If you don’t, retirement security may not be in the cards for you under the current system. That’s according to BlackRock CEO Larry Fink, who recently issued a stark warning that only large companies are doing enough to help ensure their workers are ready to support themselves in their later years.
“One of the fundamental problems in America is, retirement’s not that bad of a problem for the top Fortune 500 companies. We are providing enough support to our employees where they’re getting the adequacy of retirement,” Fink told CNN.
“It’s beyond that,” Fink said. “[W]e refuse to talk about how do we get more broadening of our economy with more Americans participating in that. That’s why we have to have a conversation in Washington, this has to be considered a national priority and a national promise to all Americans.”
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
Many workers are inadequately prepared for retirement
Fink, who is worth $1.2 billion, heads up an organization that manages $10 billion in retirement assets serving 35 million investors. So, the CEO is uniquely positioned to understand just how much Americans are struggling with preparing for their later years.
These problems persist across all generations, with a recent Goldman Sachs Retirement Survey & Insights Report revealing that:
- 45% of GenXers say they are behind on retirement savings and around half of all Boomers feel the same.
- Only 43% of millennials are very confident they’ll be able to hit retirement savings targets, while 75% say paying down existing loans is interfering with their ability to save.
Vanguard data also show people don’t just feel behind — they are behind. Median account balances are just $87,571 for people ages 55 to 64, and $88,488 for those 65 and over. For this latter group who are already around retirement age, the median balance of $88,488 would produce just under $3,540 in annual income at a safe 4% withdrawal rate.
With so little saved, it’s likely no surprise that Federal Reserve data shows only 34% of the public as a whole feels their retirement savings are on track, and 27% of adults who said they were retired in 2023 were still working in some capacity.
Inadequate support for retirement planning leaves workers vulnerable
The good news is that many workers do have access to a 401(k), with around 73% of all civilian workers enjoying access to retirement benefits in 2023 according to the Bureau of Labor Statistics.
However, as Fink points out, larger companies are far more likely than smaller ones to help their workers prepare for the future. And Fidelity data did reveal that only 34% of small employers provide a retirement plan, so many workers at small companies may be lacking in opportunities to invest.
Unfortunately, even when plans are provided, many workers also don’t effectively use these plans, often because of a lack of knowledge.
Around 54% of workers cite financial wellness benefits as their number-one most requested workplace benefit, according to a 2022 BrightPlan wellness survey, which suggests a significant need for more guidance on money management. Plus, as many as 59% of employees who are offered 401(k)s but who don’t participate in them are unaware they aren’t actually making contributions and think they are investing, a report by Principal Financial Group shows.
Clearly, more should be done to help those who are struggling to both find ways to save and to understand how to effectively use retirement plans to build a more secure future. Fink believes the burden of helping those who are behind — and especially young people — should fall to his generation, especially as older Americans have largely prioritized their own financial needs rather than creating an economy that enables everyone to prepare for retirement.
“It’s no wonder younger generations, Millennials and Gen Z, are so economically anxious,” Fink wrote. “They believe my generation — the baby boomers — have focused on their own financial well-being to the detriment of who comes next. And in the case of retirement, they’re right.”
How to fix the retirement crisis, according to Fink
So what are Fink’s suggestions?
Automate retirement. For one thing, he believes we should be making retirement investing the default. “As a nation, we should do everything we can to make retirement investing more automatic for workers,” he advised.
Delay retirement. He’s also suggested doing more to encourage people to delay retirement, which could both provide more time to save and help to stabilize Social Security’s finances. He’s not alone, as others have recommended raising the Social Security retirement age.
Streamline saving and withdrawals. Finally, he’s a proponent of providing more intuitive investment options to workers, mandating employer contributions similar to the Superannuation Guarantee program in Australia, and assisting current retirees in spending their savings more effectively. For example, BlackRock’s LifePath Paycheck automatically provides “paychecks” to workers from their retirement plans by transferring some funds to annuity plans.
How do your savings compare?
Here are articles that give a sense of how your savings compare to others in your peer group.
Source link
Add a Comment