In a letter to investors, Larry Fink, who is CEO of the massive investment firm Blackrock, warned that retirement “is a much harder proposition than it was 30 years ago. And it’ll be a much harder proposition 30 years from now.” One reason, he says: “As a society, 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.”
Fink is exactly right, as far as he goes. But he ought to be thinking more broadly about the challenges of old age in the US.
A Failed System
Some of his motivation, of course, is to sell product. After all, Blackrock manages $10 trillion in assets, much of it in retirement accounts, and Fink would love to add to that portfolio.
But, that shouldn’t discredit him, even in the eyes of progressives. And it is important that someone with his clout highlights the issues of aging and promises to help change policy to address it.
Where he misses the mark, though, is by seeing the challenges as strictly financial. It may be hard for a Wall Street guy to believe, but even a nest egg of hundreds of thousands of dollars can’t assure a comfortable old age or overcome the many impediments to care faced by older adults.
Care Lags Behind Medical Tech
Still, money matters. And many Americans never will have the financial resources to pay for significant long-term care needs in old age. Policy changes need to help those people, most of whom worked hard all their lives.
Fink rightly identifies the implications of new diabetes and weight loss drugs such as Ozempic and Mounjaro. They may improve the health of millions of people and even increase their life expectancies. Yet, our models of personal care have failed to keep up with advances in medical technology. Some may live longer lives but not necessarily better ones.
It is a similar story with the new class of anti-Alzheimer’s drugs. One day, they may materially delay the onset of one form of dementia. But even if they do, disease eventually will limit the ability of older adults to function. They will need help, yet the system of providing that assistance is deeply flawed.
Organizing Care
The US needs to greatly improve how it coordinates health care as well as how it integrates medical treatment with long-term care for those with chronic conditions. It needs to do a better job supporting family caregivers, who provide 80 percent of the personal assistance for loved ones living at home, often at great emotional, physical, and financial cost.
Fink also rightly identifies the problem of under-spending in old age, though he unsurprisingly focuses on high-asset seniors who could spend more to enhance their well-being, but don’t. Even people with long-term care insurance often delay making claims for so long that they die before receiving full benefits.
Helping Middle-Income Seniors
But most people who underspend in retirement do so simply because they have insufficient resources. Fink should think about how to help those whose working-age incomes are so low that they’ll never make enough to support themselves should they need long-term care. Social Security alone, or even combined with a modest 401(k), won’t do it.
More than half of those aged 65 and older will need a high level of personal care before they die, according to my Urban Institute colleague Richard Johnson. Men will need that care for an average of two years and women for three years. And the costs are staggering. According to Genworth’s 2023 cost of care survey, home care aides cost an average of $33/hour, or $132-a-day for just a four-hour shift. The average monthly cost of a private room in a nursing home: almost $10,000.
Even lower levels of support are unaffordable for most. For example, many older adults could benefit from living in a residential community where they could receive healthy meals, exercise, and the opportunity to socialize with peers. But while there are many senior living options for wealthy seniors, and even some subsidized housing for low-income older adults, there are few choices for millions of middle-income Americans. We need to think about how to finance and build these communities.
Sure, people should save more. And Fink promotes various automatic work-based savings plans. All good. But even many of those who enroll in 401(k)-type plans fail to save enough for old age.
Perhaps they are living paycheck to paycheck or maybe they have other demands on their income—buying a car or a house, putting money away for their kids’ college, or paying for medical care.
Solving retirement is complicated and hard, especially for those who will need long-term care. But I’m happy to welcome Larry Fink to the team of those trying to figure it out.