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In this talk given to NYU students, Larry Fink – chairman and CEO of BlackRock, the firm he co-founded in 1988 – paints an interesting picture of the trends, challenges and issues resulting from retirement funding. He makes some fascinating points, not just about the current issues, but also about some looming in the future.

We all know the crux of the problem – we’re living much longer and we’ll be much healthier through our retirements than past generations. Overlay the general aging of the population and the inability of the government to fund pensions to a satisfactory level, and it means that the burden of funding retirement is falling back on individuals. Of course, many are only just realising this and are not prepared at all. For example, most US workers have saved less than $25,000 towards retirement.

Most interestingly in this talk, Fink discusses not only the issues facing individuals but what he thinks other issues arising from this current lack of retirement funding are doing to the world. For example, he points out that a lot of Europe’s current debt problems have their root in previously too generous pension schemes. Cutting back entitlements has led to people staying in their jobs longer and this is creating a crisis in youth unemployment in countries such as Spain and Greece where youth unemployment is over 50% (in Greece, it is 62.5%). This will be a long-term issue that could create a feeling of hopelessness amongst a generation. The global economy will have to deal with the effects of this as those people move through life.

Fink believes this is a crisis – and that three groups need to take more responsibility:
– governments (by mandating forced savings, similar to Australia’s system);
– fund managers (need to focus less on short-term sales, more on long-term needs – I smiled at that one!); and,
– employers (need to provide more education and assistance).

This is a wide ranging talk, informative as well as entertaining.