Two HR takeaways from Larry Fink’s letter on the retirement crisis

BlackRock CEO Larry Fink addressed the retirement crisis in his annual letter to investors on March 26, making the case that Americans should work later into their lives in light of demographic and economic factors straining the system.

Around the world, workers are living longer lives, making it more challenging to save enough for retirement, Fink wrote in his letter. Pension enrollment in the US is on the decline, and an aging workforce is putting a strain on the Social Security Administration, which says it will not be able to pay people their full benefits by 2034.

Fink challenged “our anchor idea for the right retirement age—65 years old,” in light of these trends. (Americans can receive Social Security starting at age 62, though they don’t start to receive full retirement benefits until they’re either 66 or 67, depending on when they were born.)

The prospect of an aging workforce, as described by Fink, would mean HR departments may not only have to find ways to hire and retain older workers who are capable of working for longer, but also help employees think more carefully about saving for retirement.

Preparing to absorb an aging workforce. Many Americans are already working past the age Fink identified; Almost one in five (19%) Americans 65 and older were employed as of 2023, according to Pew Research, nearly double the share of those who worked past that age in 1987.

But historically, employers haven’t always been open to bringing on or keeping older workers.

Recent research from Boston College’s Center for Retirement Research (CRR) suggests this is changing somewhat. Data shows older workers are no less productive than their younger counterparts, and the majority of employers surveyed by CRR recognize this, as well. An analysis of job posting sites by CRR indicates employers are willing to hire older workers, though job postings directly targeting these older workers tend to pay less and offer fewer benefits.

Some employers are starting to offer benefits such as phased retirement and reskilling programs to better support aging workforces, HR Brew previously reported.

Alicia Munnell, director of the CRR, said she doesn’t see a one-size-fits-all solution to the retirement crisis. “There’s a big swath of the population who really needs to retire at 62,” whether that’s due to poor health or time spent in the workforce, she said.

“I think we sort of need to let the air out of this balloon somewhat, so that we don’t push all older people into a position where they’re facing a higher retirement age,” Munnell said. “And for that, I think we need some creative way to get the people who can work, who employers will like, to stay in the labor force.”

Munnell has previously suggested restoring a mandatory retirement age, arguing that employers would be more willing to hire and retain older workers if they could dismiss them at a certain age (say, 70). A more generous earned income tax credit might “take off some of the pressures” for older workers, as well, she added.

Helping workers save for retirement. Hiring older workers only addresses one part of the retirement crisis. A major driver of the problem is the fact many Americans aren’t saving enough to retire—Fink noted nearly one-half of Americans aged 55–65 had no personal retirement savings as of 2022, according to the Census Bureau.

Rethinking how workers view their retirement accounts might help address this savings shortfall. A 2019 paper published by Munnell and a CRR colleague noted that showing employees their total 401(k) or IRA balances may give them a false sense of security, and instead suggested statements should show employees the monthly income they will receive when they retire at the current rate they’re saving. This approach, they wrote, may help workers realize “they do not have enough and convince them to either boost their savings rate or work longer.”

For HR decision-makers supporting lower and middle-income workers, the primary focus should be simply on getting workers to save for retirement, rather than whether they’re saving an adequate amount, said Timothy Flacke, co-founder and executive director of Commonwealth, a non-profit seeking to build financial security. One way Commonwealth advocates for this is by encouraging employers to offer workers emergency savings accounts alongside retirement (the organization has worked with BlackRock on an emergency savings initiative, and Larry Fink touted this benefit in his letter). “By focusing on the short term,” Flacke argued, “you make it possible for people to think about the long term.”