We Have A Retirement Crisis

When a billionaire corporate executive and Senator Bernie Sanders agree on something, it’s worth paying attention. If they had a cozy lunch, there would be more dessert forks than pitched forks. In public, both Sanders and BlackRock
BLK
CEO Larry Fink agree — America is facing an increasingly urgent “retirement crisis” that must be addressed immediately. The longer we wait the more expensive it is to fix.

Bernie warned us about America’s coming retirement crisis for years, as have I, recently as Sanders’ lead witness in Senate hearings on the retirement crisis. But Fink’s 11,000-word 2024 annual letter to shareholders was a surprise that signifies a growing consensus about the crisis facing tens of millions of older Americans, and generations to come.

Fink’s clear-eyed assessment of our dire situation is refreshing — unlike some recent denials of the retirement crisis, chiefly by Republicans pushing for Social Security cuts. Rather than dismissing reality to avert action — a political cop-out that’s only making things worse — Fink rightly reports that “nearly half of Americans aged 55 to 65 reported not having a single dollar saved in personal retirement accounts,” according to US census data. “Nothing in a pension. Zero in an IRA or 401(k).”

Carrots Instead of Sticks

What’s really newsworthy is that Fink doesn’t just tell everyone to work longer and invest their money better — he urges a strengthening of Social Security and public policies to promote retirement accounts for all. Fink writes: “Today in America, the retirement message that the government and companies tell their workers is effectively: ‘You’re on your own.’” To change that, he argues, “America needs an organized, high-level effort to ensure that future generations can live out their final years with dignity.”

Great, but how? While Fink promotes raising the retirement age at which people can collect full Social Security benefits — a very problematic idea for many reasons — he also wants to strengthen both Social Security and older workers’ financial security so they are not laboring into old age out of desperation. He writes: “How do we encourage more people who wish to work longer with carrots rather than sticks? What if the government and the private sector treated 60-plus year-olds as late-career workers with much to offer rather than people who should retire.” Carrots are good for us — they improve our vision.

Working Longer Is Not The Solution

Unfortunately, Fink backs the “work longer” dictum and wants to raise the full retirement age, though at least he qualifies it: “No one should have to work longer than they want to. But I do think it’s a bit crazy that our anchor idea for the right retirement age — 65 years old — originates from the time of the Ottoman Empire.”

As I told CBS News, Fink’s conclusion that people should work longer ignores some big realities. “Many Americans haven’t been able to save for their old age, with about 3 in 10 workers age 59 or older having no money put away for retirement.” In my book, “Work, Retire, Repeat,” I document how decades of this “work longer” mantra have been largely a dead-end path that has undermined retirement security.

The problem is, economic pressures compel many older Americans to work longer than they want to, and raising the retirement age won’t help. Yes, people are living longer and, if they’re lucky, spending more years in retirement — squeezing Social Security ever tighter. But even for those who want to keep working, the labor market is not kind for older workers. There are major impediments to working longer: widespread age discrimination; lower-wage and physically demanding jobs that keep many older workers on a dangerous treadmill; many older workers are pushed out of their jobs before they’re ready to retire; and many of the fastest-growing jobs for older workers are lower-paying and physically taxing.

Promising Solutions

One carrot Fink highlights is Australia’s successful “Superannuation Guarantee” approach, in which, since 1992, employers contribute a small portion of workers’ pay into retirement accounts that bolster employees’ future retirement plans. And Fink is right: this “could be a good model for American policymakers to study and build on,” and “about 20 U.S. states — like Colorado and Virginia — that have instituted retirement systems to cover all workers like Australia does, even if they’re gig or part-time.”

Rather than rely on a patchwork of state approaches, we should heed Fink’s call to action by supporting national policies like the Retirement Savings for Americans Act (RSAA), which has bipartisan backing in both chambers of Congress. The RSAA would expand retirement plans to private-sector workers who don’t have any coverage. Modeled after the successful federal Thrift Savings Plan, the RSAA features automatic enrollment, portability, good investment options, sensible deaccumulation, and a 5 percent government match for eligible savers. The match for low-income savers mitigates the top-heaviness of current retirement tax breaks, where the top 20% of taxpayers currently receive over 60% of the $267 billion spent.

With everyone from Larry Fink to Bernie Sanders recognizing that our retirement system is in urgent need of repair, we should seize this opportunity to make America’s seniors more financially secure, so they can truly choose between comfortable retirement or decent, fulfilling work.