Apr 19, 2024
As sage billionaires go, BlackRock chairman and CEO Larry Fink belongs in the same rarefied air as Warren Buffett.
And while he probably stopped worrying about his own nest egg a long time ago, Fink remains concerned for those retirees who do or don't realize they should. Because for him, it’s personal.
Advertisement
In his 2024 annual letter to shareholders, Fink recalled going through his parents' finances after his mother passed away and his father started to decline. He surmised that they never made more than a combined $150,000 a year in today's dollars. Yet was shocked that their retirement savings "was an order of magnitude bigger” than someone would expect for a couple with their income.
“And when we finished going over their estate, we learned why: My parents' investments,” he wrote. The experience reminded him that BlackRock was started "because we believed participating in those markets was going to be crucial for people who wanted to retire comfortably and financially secure."
In a March interview with Bloomberg, Fink addressed the financial challenges that keep Americans from retiring with dignity, which revolve around the overreliance on Social Security and the failure to save for investing.
Building on the ‘fantastic foundation’ of Social Security
"Social Security is a fantastic foundation for retirement," Fink said. "But if that's all you have when you retire, you're going to be living below the poverty line. It's supplemental but it's not meant to be the totality of what you have in retirement."
While there’s no consensus on how much money you need to retire (and everyone’s situation is different), one yardstick is the 80% Rule, where you plan to spend 80% of your pre-retirement income per year. Assuming you retire from a job with a $100,000 annual salary, Social Security won’t come close to cutting it.
The current average monthly benefit for retirees is $1,907, or just under $23,000 a year, according to the Social Security Administration. The shortfall? More than $57,000. The maximum benefit for an individual retiring at age 70 in 2024 is $4,873 per month or $58,476 a year.
Fink also noted in the Bloomberg interview that our current retirement system “was based on statistics created 50 years ago” when the average life expectancy was below 70. Today’s statistics show that with a couple in good health, “one of them’s going to live over 90.”
Advertisement
Breakthroughs in treating dementia, heart disease and obesity have extended life spans, he pointed out. While marveling at these “miracles of medicine,” as he calls them, Fink lamented: "There is not a dialogue in America or most places about, 'Can we afford that longevity?'"
Unless Congress takes action to shore up the system, Social Security will not be able to keep paying all promised benefits beyond 2033. Benefits are expected to be cut by around 20% starting in 2034.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Saving retirement through saving for investment
"We need to really educate our citizens about the need for savings," said Fink — though not via vanilla bank accounts. Investing, he stressed, allows people to take advantage of capital markets and compounding.
While adding to your portfolio, do a cursory examination of your outflow (expenses) and inflow (bringing in extra funds). The best cuts and side hustles are the most painless. Imagine selling off your expensive SUV and renting out the now-empty garage or parking space on the same weekend – then putting the money into your IRA or 401(k).
Some of the simplest and best investment advice comes from another shareholder letter – this one from Buffett in 2013 to Berkshire Hathaway investors. On his wife's inheritance after his passing he said, “My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”
In the end, how much you get to live on in your retirement determines how you get to live. “My parents lived their final years with dignity and financial freedom,” Fink wrote. “Most people don’t have that chance. But they can.”
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Lou Carlozo is a freelance contributor to Moneywise.
