Solutions for the retirement crisis in the US have been limited as increased lifespans have far exceeded the infrastructure we have in place to support it. While the issue isn’t new—sporadic conversations have occurred every few months with regard to the issue—the lack of a strategy is causing worry among workers nationally. In his 2024 Annual Chairman Letter to Investors, BlackRock CEO Larry Fink brought attention to a retirement crisis letter that renewed interest in the conversation, discussing strategies on how to address the matter. The public opinion on existing retirement security measures remains unfavorable as many worry that even the social security payout they’re hoping to fall back on will dry out by the time they make it to 65.
On the Hunt: Seeking Solutions for the Retirement Crisis in the US
The Retirement Insecurity 2024: Americans’ Views of Retirement survey conducted by Greenwald Research found that 79 percent of Americans believe the retirement crisis is a serious issue, which is higher than the 67 percent worried about it in 2020. 55 percent of these respondents expressed worry about achieving financial security after retirement. Why are these numbers so high and what seems to be the issue?
The Social Security Act was signed into law in 1935 and was one of the most monumental decisions made in support of American workers and their futures. The retirement age and the age for drawing benefits is set as 65, which is largely a standard for many regions across the globe. Based on their own credits and average indexed monthly earnings, workers can receive benefits from the government that can help them sustain their lives post-retirement, claimable from the age of 62. Pension plans have largely disappeared from the picture as many Americans have not been able to earn enough to invest in other savings, even 401(k)s.
Some employers provide assistance with insurance and retirement plans but this is again restricted to a specific segment of the population—56 million workers don’t have access to employer-sponsored retirement plans according to reports by The Pew Charitable Trusts. With issues of inflation, high cost of living, frequent layoffs, lingering cases of long COVID and a collection of other issues, Americans are struggling to save for the future.
What Does BlackRock CEO Larry Fink’s Retirement Crisis Letter Have to Say?
BlackRock CEO Larry Fink’s retirement crisis letter highlights that, as a population, we live longer lives due to improved quality of life and better access to healthcare compared to the past. While this is a good thing for everyone who gets to spend more time being able-bodied and capable of doing what they love, they are still retiring around 65. The retirement benefits they have saved remain the same but their extended lifespans draw on these benefits for much longer. Earlier, many citizens didn’t live to 65 to claim much of their retirement benefits but things are different now. The link between the Social Security crisis and retirement age comes into play here.
What makes matters more concrete, is that reports indicate that the Social Security system may be unable to pay full benefits after 2033. This gives the country around 10 years to re-evaluate and update the systems we have in place, otherwise citizens both old and young see the consequences trickle down to them. The Pew Charitable Trusts found that public assistance costs will go up by a great degree when workers find themselves unable to survive post-retirement. This money will be tied to taxes so those numbers will move up as well.
Fink referenced a U.S. Census Bureau survey, which focused on how nearly half the Americans between 55 and 65 do not have any personal savings for their retirement. The public opinion on retirement security measures continues to weaken with the only light in the dark being the upcoming Federal regulations that will require employers with 401(k) plans to auto-enroll their new employees into it as soon as possible. Part-time and gig workers have been left even further behind in this regard, with no permanent employer to help them navigate these benefits.
Solutions for the Retirement Crisis in the US
CEO Fink believes that the government and top business leaders must come together to create a better system that carefully addresses the social security crisis and retirement age factor to secure the country’s future. For those wondering how to address the retirement crisis in America, the process would include businesses doing their part to assist employees with retirement benefits that can support them later in their lives. Not only does this mean assisting with automated savings programs, but employers can also aid employees in the process of improving their financial literacy to understand the situation more efficiently.
Raising the retirement age for seeking Social Security benefits is another solution, which 71-year-old BlackRock CEO Larry Fink explores in his retirement crisis letter. If people work for a few years longer before retiring, they have additional savings ahead of them. Not only do they save more, they start drawing from the Social Security reserves a little later in their lives. This approach to the Social Security crisis and retirement age is not ideal. Most employees are already overworked and pushed to their limits by the daily grind. Additional years of such an intense work cycle may well damage their health and cause them to draw more heavily from their retirement funds when they do retire.
No concrete solutions for the retirement crisis in the US have been settled on, but if organizations become more particular about offering such financial assistance, their employees will benefit in the long run, and a win for them is a win for the company. If organizations start setting policies into motion today, they will be better prepared to handle the impact of the government policies that will inevitably come in the future.