Larry Fink is the top dog at Black Rock, the asset manager that owns a good deal of the world. He is what in “Alex” is known as a “master of the universe” and on this blog as a big banana.
Although American, I don’t suppose Larry would be found in your local five and dime as pictured above. But those pictured may well be unwittingly invested in Black Rock funds and be pondering how to solve finance’s hardest problem – turning a pot to a wage for life pension.
Last week the big banana addressed his annual letter to the world and it was on this very theme. Frankly – it’s the kind of thing you read on this blog every day but it got a lot of notice because it was Fink doing the talking.
Fink called for increasing global use of capital markets to help workers save for old age.
The BlackRock chief also warned that the rise of defined contribution pension plans had combined with the growing strain on the social security government retirement programme to leave the US particularly unprepared for a huge increase in the retiree population.
“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. Today in America, the retirement message that the government and companies tell their workers is effectively: ‘You’re on your own.’”
Well blow me down!
At least it is reassuring that a country even richer than the UK has the same spread of incompetence as we do. The FT reports;
Even those who have substantial savings find it confusing to manage their pension pots while ensuring the money does not run out.
and their top America reporters offer this insight
Many workers wish for the simplicity of a pension that does not run out: 73 per cent of workers surveyed last year by insurer Nationwide said they wished their 401k plan had a lifetime income option. “The notion of a guaranteed pay cheque, that you can’t outlive your savings — people want that,” said Anne Ackerley, head of BlackRock’s retirement group.
Good on you Anne, but do we really need to hear this from BlackRock’s head of retirement?
More seriously moneyed Yankee experts are roped in to testify to the central theme of this blog.
“We are going to have a ‘world is not flat’ moment, when asset managers are going to realise we are not prepared to help people draw down,” said Bill Meyer, CEO of Retiree Inc, a retirement planning software company owned by T Rowe Price. “Drawdown is not simple. It’s like a Rubik’s Cube.”
Of course it is – and I have never done a Rubik’s cube either. I would no more trust myself to drawdown my two pots as I would to run a defined benefit scheme. I do however know people who do run defined benefit schemes and were they prepared to take my money and give me a better rate than an annuity , I’d give them my pots.
This simple thought has guided me ever since I set up AgeWage in 2018 and I’m pleased to say , that I am now rather close to having just such a defined benefit scheme to rid me of my pesky freedoms!
I am glad to know that I am not alone! I look forward to when the scheme we call Pension SuperHaven is up and running and I can go on my American road trip and meet the kind of folk who hang out in five and dimes! They may not be big bananas but they might be a bit more fun than Larry!
