Welcome to The Bid, where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm your host, Oscar Pulido.
Younger investors are looking to the future with greater anxiety than future generations. They are looking at a future with aging populations and reduced labor forces and a new age of technology and connectivity that is impacting their values and expectations. On the other hand, pre-retirees now are having to consider that fact that their generation will live longer and what do they want to prioritize in their retirement years.
So what do investors at different stages and ages need to consider when planning for their future, and how do those approaches differ?
In this special episode, we took The Bid down under to record this episode live. Liz Koehler, Head of Advisor Engagement for BlackRock’s US Wealth Advisory business joined me at the event in Melbourne. Liz and I discussed how the younger generation are thinking about their future and what pre-retirees should be thinking about as they head toward retirement age, and opportunities all investors could take advantage of as they prepare for their futures.
Oscar Pulido: Liz, thank you so much for joining us on The Bid.
Liz Koehler: Thanks for having me.
Oscar Pulido: So Liz, this morning I was walking to work through the city and walking towards the river and I looked up and I saw hot air balloons flying overhead.
Normally I'm walking through New York City on the way to the Hudson River, but I was actually walking through the streets of Melbourne, Australia walking towards the Yarra River, and that's why I saw the hot air balloons. So here we are, The Bid is down under.
Liz Koehler: Very exciting.
Oscar Pulido: Thank you for joining us here. I know it's, a great distance. And the other thing about this podcast is that we actually have a lot of individuals looking at us right now. We're in front of a live audience, so to prove that I'm going to say… G'Day, Melbourne!
Audience: G'day!
Oscar Pulido: There they are! Liz, regardless of where we are in the world right now, there are topics that sort of transcend borders and demographics and aging populations is one of those topics. So, in the past, on the podcast we've talked about the aging population, we talked about the pandemic and how that forced a lot of people to retire early. So, maybe just give us a state of play today. Where are we when you think about the demographic landscape?
Liz Koehler: Thanks Oscar, so demographic divergence is absolutely one of the five key mega forces, that BlackRock continues to track. And some of the themes that we're seeing, is people over the age of 65 tend to be the age group that is growing the fastest globally. And that has implications, certainly, including for fewer people in the workforce, causing us to do more with less but the reality remains, there are still some really interesting technological and medical advancements that could create some great opportunities for us.
Maybe just focusing for a moment on the investor landscape, so, similarly, baby boomers hold the lion's share of the wealth as well today, not surprising, but their wealth is growing significantly slower than generations that are coming after them. So, for example, millennials, their wealth has grown exponentially quickly, given where they are from an earning cycles perspective and also the great wealth transfer. But the reality remains that these generations, in particularly millennials and Gen Z, are quite different in terms of who they are and what they want.
Oscar Pulido: So, you mentioned Gen Z and the millennials, these younger generations. How did they perceive their ability to save and build wealth? Maybe talk a little bit about, how that compares to the baby boomers, for example.
Liz Koehler: So, these two generations have just experienced the world differently, than their parents did. They have different fears, different values, different insights and perspectives. Just for example, millennials were really born into, the more prosperous nineties, right? They had fairly encouraging baby boomer parents. They tend to be more optimistic, a bit more collaborative. They saw the rise of innovation, they saw the rise of smartphones and social media, for example. And then you have Gen Z who was born more into, call it the lost decade of the two thousands, tend to be a bit more independent, really born into ubiquitous connectivity twenty four seven news. COVID was a pretty defining event for them, and they're also often called the socially conscious generation.
So, millennials on one hand, saw the rise of innovation and Gen Z was immersed in it. Maybe just a few more quick things about the generations, they tend to stay with employers for less and less time, and so while they have options available to them, oftentimes they're navigating retirement savings in a more independent way, and they want to invest in brands and services that have a real purpose and align to their values.
Oscar Pulido: You mentioned that both of those generations grew up in, in periods of technological change, different periods, but still technology became a bigger part of their day-to-day. So, with the expansion of AI and technology, does that help this generation in terms of making investment decisions, or does it actually do the opposite where it's information overload?
Liz Koehler: Yeah. By the way, did you know I'm a geriatric millennial? Did you know that was actually a thing?
Oscar Pulido: Is that on the cusp of millennial? Is that what that means?
Liz Koehler: I'm either Zennial or a geriatric millennial.
Oscar Pulido: I might be with you on that one.
Liz Koehler: Geriatric… I don't like that. To your point, there is definitely a lot of information out there, and some of it is useful and well-informed and a lot of it is not, and oftentimes it's out there on social media platforms. And so, what I would ask when we think about financial professionals in the industry, who have expertise, who have experience, who can proactively share information that's really useful for these generations and will help them achieve more financial wellbeing, please do it. I think as an industry, we all can challenge ourselves to do better around more plain English, less jargon being clearer to really help people understand and invest for the future.
Oscar Pulido: Yeah, for sure the financial services industry can introduce a lot of terminology and jargon. I think all generations could probably benefit from a simplification of those terms. Let's go back to the retirees and pre-retirees, which I think is where the baby boomers tend to sit more. What are some of the challenges that they're facing?
Liz Koehler: Yeah, oftentimes I think this idea of retirement is a bit of a manufactured concept, right? And what I mean by that is historically people didn't necessarily abruptly retire, right? A lot of times people couldn't afford it, so they continued to press on, and it was more of this kind of gentle transition from life stage to life stage. Don't get me wrong, I think retirement can be a wonderful thing, but oftentimes it brings a lot of fear these days. People wondering about their independence and finances and sense of purpose. And so there's a lot of uncertainty and fear that can come with it if people don't think about and plan for the future. and also thinking about sources of retirement income and healthcare planning and getting family involved. There's a lot to think about. And so I think those are some of the challenges that exist, but I do think there are things we can do to help ourselves.
Oscar Pulido: I've heard you say the term 'rewirement', sounds like if a two or three-year-old was trying to say the word retirement and what it would sound like, but you actually mean it as a distinct term, I think, right?
Liz Koehler: Absolutely. I think it, it aligns to what we just said, which is we can think differently if we plan and we create more intention around what we're doing, and that's why we tweaked the word to be 'rewirement.'
Oscar Pulido: And so I think I know the answer to this question. You're sort of alluding to it, but retirement seems to look very different today than it did 2030, or or even 40 years ago. So, walk us through maybe some of those differences for somebody who's heading into that stage.
Liz Koehler: Well look, one, I think that we have an opportunity to be a little bit more intentional around what we want retirement, rewirement to look like. And so I think that there are questions that we can ask ourselves ahead of time and each other around.
What do you envision that retirement to be? Who is someone that you think has retired well and why? What are some of the strengths and accomplishments that you want to take forward with you? Where do you want to live? Who matters to you and why? Who do you matter to? I think there are questions that we can ask ourselves ahead of time in preparation, for designing that retirement that we want.
Certainly, starting early is really important. I think, Albert Einstein called it the eighth Wonder of the World, the power of Compounding, right? And working with professionals to seek advice. But we worked with a great company called Designing for Better to think about frameworks and questions we can ask ourselves to help in retirement.
Oscar Pulido: Those questions that you started to go through, are those supposed to be intuitive to people or how do folks know? What are those right questions to ask themselves as they're thinking about retirement?
Liz Koehler: I think that oftentimes, we're all moving fast, right? We're trying to accumulate assets for retirement. We're thinking about families and work and all of the things that go into our busy lives. And so I don't think it's difficult. I think a lot of times these are common sense questions. They're just not common practice. And so, I think if we can push ourselves to pause, reflect, think about, and ask each other, and also do this as partners and families, it can go a long way.
Oscar Pulido: It's, women's History Month, so it would, I'd be remiss if I then didn't. Think about it, looking through the lens of, women, seeking to retire. Are there unique challenges that, you think women face as they head to this stage of their life as well?
Liz Koehler: Yeah. opportunities and challenges, right. So, the truth is we're moving to a situation, a world in which women are poised to hold the majority of the wealth. That is a pattern that we've seen, women, 80 to 90% of women will at some point in their lives be solely responsible for their finances and their homes. Oftentimes they're breadwinners or co breadwinners in their houses, and so there's a lot of interesting patterns that exist. But also, there's still some statistics that are a little bit, unfortunate, right?
I think, the number is now 61% of women would rather talk about their own death than money, right? So, it's not something that they lean into all the time. I think they're looking for financial security, absolutely. and I think while more concerned with things like short-term debt, they can see the power and the importance of staying invested. And so, the good news is we can work on this through education, through transparency, through conversation. And women, when they have the information that they need, are actually quite good investors. They're disciplined, they stick with the plan, and they invest for the future. And so, I think it's more about having the conversation and opening it up and sharing insights.
Oscar Pulido: I mentioned we're in Australia, which is, a nice, change of pattern to walk through the streets in the summer, and it's only March. But let's talk about Australian investors actually learned earlier today that Australia has the third highest life expectancy in the world. So, longevity, risk, or living longer is a nice problem to have, and Australia's right near the top of that list. So can you talk to us about some of the trends? In Australia, how do they compare to other trends that you see in other parts of the world?
Liz Koehler: So, a lot of the same demographic patterns and trends we talked about hold true in Australia as well. I will say one thing I've learned more about is they have a well-established and well-funded retirement saving system, superannuation, which is great, and I think other markets could probably have learned from some of the patterns in terms of retirement savings. I think one could argue across the board for all investors that. We learn sometimes to save well for retirement, we also need to learn to spend well in retirement for sure. But when you look at local regulatory changes, they're setting more Australians up for access to more advice in retirement, which I think is really encouraging.
And also, the development of more and more products and solutions to help retirees. And then I think other patterns we talked about, other trends around starting early, seeking advice, thinking about wellbeing in retirement hold true, absolutely. But I will say that we could all strive to live in a nice climate with beautiful weather like this one.
Oscar Pulido: And hot air balloons in the sky, on your morning commute, which I'm just not used to seeing in New York. And you mentioned superannuation, which, maybe not everybody's familiar with that term, but think of it as compulsory savings and to your point, in Australia and some other select economies around the world that have these types of plans. People end up with savings in retirement, but they still need some guidance on how to spend, in retirement.
So, what does this mean for investors, Liz? Yyou talked about the millennials and the Gen Zs liking to express their preferences and invest in brands that they like, what does this mean when you think about this mega force of demographics? Tell us what the end investor should be thinking about.
Liz Koehler: I think at the end of the day, a few things. One, understand your goals, understand how you feel about risks. Oftentimes, if we can separate our emotion from our decisions, I know that's hard, especially when we're bombarded in the media. I think that's really important. I would say we also have this action bias as humans. I like to equate it to, penalty kick in soccer. I should probably say football. But basically the idea is oftentimes the best place to kick the ball, in a penalty kick is straight down the middle. And the reason for that is oftentimes the goalie will jump left or jump right before the ball is even kicked because they have this action bias, they feel like they need to do something. to not risk losing, that point. And I say that because as investors we can have this tendency too, and it's really important not to jump to action, but to stay invested, stay diversified for the future. One other key statistic I think is interesting for all investors to think about is oftentimes the 24 of the 25 best days in the market over the last 20 years have occurred within one month of the worst day.
And I share that because I think oftentimes, it's easy to get spooked and overreact to one given point, but if we do that, we run the risk of overreacting and losing out on some real opportunities. So, my point here is have a plan. Think through and try to control impulses ahead of time and have a plan for your long-term success and try not to let emotions get in the way of your investing for the future.
Oscar Pulido: Liz, maybe one more question. You and I have known each other for a long time and a fun fact is you called me five years ago and asked me whether I'd be interested in hosting a podcast for BlackRock. You knew there was an open role, and so thank you for that phone call, I'm enjoying this! But what is it that got you personally passionate about this topic of retirement and demographics that you're spending so much time on today?
Liz Koehler: I think, ensuring that people, all people have a chance to feel seen, feel heard, really reflect on what they want out of their lives, how they want to invest to reach their dreams, has just always been a passion for me. That's why I got into this business. And so I think taking the time to understand where people are coming from, their life experiences, how to address their concerns, and to achieve more success for them in their lives is just something that, I know a lot of the people in this room strive for each and every day, and it's just a journey worth taking.
Oscar Pulido: Liz, I know you just recently celebrated a birthday, so I have two pieces of good news for you. One is you're one year closer to retirement, and the second is that I think you're going to be in good shape 'cause you know a lot about this topic. So thank you. Thank you for joining us today on The Bid.
Liz Koehler: Thanks Oscar.
Oscar Pulido: Everybody give Liz a of applause!
