Advances in healthcare, technology, and connectivity over the past few decades have increased the longevity of people around the world.
While that is an indisputably remarkable achievement, it also brings about new retirement concerns for many.
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Specifically, living longer means people either have to work longer to support themselves or have to worry about outliving their savings. And investment firms are now addressing these concerns.
In his annual letter to shareholders, BlackRock’s chairman and CEO, Larry Fink, discussed the problem associated with longevity, which he called "one of the greatest financial challenges faced by our clients today," arguing that it was contributing to "popular anxiety."
"The combination of global growth and medical advancements, driven by the free exchange of intellectual and financial capital across borders, has increased longevity dramatically in many parts of the world," he wrote. "Yet living longer also means working longer — and paying for additional years of retirement."
"This dilemma is an underappreciated driver of popular anxiety: workers lack the retirement security to support their longer lives, compounding the angst they feel about their employment prospects and the path of economic development," he added.
Notably, the Insured Retirement Institute surveyed 800 Americans ages 54 to 70 and found that just 23% of the baby-boomer respondents thought that their savings would last through retirement or that they had done a good job preparing for retirement. Moreover, only 54% had any retirement savings, and only 40% had tried to calculate how much money they would need to retire.
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The crux of the longevity problem addressed by Fink is that sometimes working longer is not a realistic option for people who are approaching retirement age. And so folks who plan to retire in their mid-60s to early 70s effectively need to have to have enough money saved up for another decade or two.
At the same time, the labor market is in the midst of a transition period in which various jobs are becoming automated. And for those who are displaced at an older age, it is not always easy to learn new skills or return to school to adapt to changes in the labor market.
Moreover, more physically demanding jobs are sometimes simply more difficult to do for older workers, even if those jobs are not necessarily going away.
Finally, Fink argues that this problem is being exacerbated by changes in the retirement systems, which have increasingly shifted from traditional pensions to defined-contribution plans.
"This has diminished the capacity for risk-sharing, as traditional defined benefit plans that pooled risk-taking on behalf of employees helped protect those whose longevity exceeded expectations,” Fink wrote. “Perhaps even more importantly, this has shifted the responsibility for saving for the future from the employer to the individual.
"The transformation of our retirement system, however, has not been coupled with the education or the tools that savers need to succeed," he continued. "This is an area where employers, governments and asset managers all have a critical role to play, and one where asset managers, among others, have historically done a poor job in helping individuals access the education they need to navigate the investment process."
This article originally appeared on Business Insider. Read more from Business Insider:
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