What Larry Fink Misses About the Coming Social Security Crunch

March 26, 2024

This is rich, in every sense of the word.

BlackRock’s CEO Larry Fink in his annual letter warned Baby Boomers that younger generations “believe my generation – the baby boomers – have focused on their own financial well-being to the detriment of who comes next. And in the case of retirement, they’re right.”

Fink questioned whether age 65 should still be the conventional window for retirement, with Social Security available as early as age 62 and Medicare benefits at 65.

He wrote: “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 … The federal government has prioritized maintaining entitlement benefits for people my age (I’m 71) even though it might mean that Social Security will struggle to meet its full obligations when younger workers retire.”

Fink is not wrong. In 1950, each Social Security recipient was supported by the wages of 16 workers. Today it is under three. The swelling of the elderly Baby Boom population and smaller families makes for a cash crunch that no politician wants to face. So kudos to Larry Fink for raising the issue.

But wait … Fink has also been one of the principal drivers of imposing ESG standards on investment funds, including those of state pensions for employees. In the last five years, according to Terrence Keeley, former BlackRock senior executive, global ESG funds have underperformed the broader market with an average return of 6.3 percent compared with an 8.9 percent return for non-ESG funds. An investor who put $10,000 into an average global ESG fund in 2017 would have about $13,500 today, compared to $15,250 for someone who invested in the broader market.

Advocating for good policy is one thing. But the best act Larry Fink, BlackRock and the ESG cartel could do for the coming retirement crunch is to simply be good fiduciaries.