Rethinking retirement

Are You Retirement Ready? A Call-In Guide to Retirement

Episode Description:

In this special episode, we’ve asked some of our listeners to send in some questions about their retirement concerns. Here with me are retirement experts Anne Ackerley, Senior Advisor on Retirement and Liz Koehler, Head of US Wealth Advisor Engagement here at BlackRock. Together we’ll answer your questions about saving for retirement and give you some strategies to consider to help you become retirement ready.

Sources: AARP Financial Security Trends Survey, January 2024; AARP 2022; IRS, 2024; BlackRock’s 2024 Read on Retirement Survey; Social Security Administration “When to start receiving retirement benefits”

Written Disclosures

This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener.

For full disclosures go to Blackrock.com/corporate/compliance/bid-disclosures

TRANSCRIPT

<<THEME MUSIC>>

Oscar Pulido: 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 Oscar Pulido.

In this special episode, we've asked some of our listeners to send in questions about their retirement concerns. Here with me are retirement experts, Ann Ackerley, Senior Advisor on retirement, and Liz Koehler, head of US Wealth Advisor Engagement here at BlackRock.

Together we'll answer your questions about saving for retirement and give you some strategies to consider to help you become retirement ready,

Anne and Liz, thank you so much for joining us on The. Bid.

Anne Ackerley: Thanks for having us.

Liz Koehler: Great to be here.

Oscar Pulido: So, Anne and Liz, it's great to have you both on. It turns out you're both experts in a topic that I think is of interest to pretty much everyone, which is retirement. I think we all aspire to get to retirement at some point.

Now, when does it happen? How does it occur? What do we need to do along the way? Those are the hard questions, and I think they're also very personal questions to different individuals. So today we're going to hear from different callers from around the country, with their questions about retirement, and they're going to hear the sage advice that both of you have. But maybe before we hear from our callers, I'd love to hear, what you are seeing in the retirement landscape?

Anne Ackerley: Great. Thanks Oscar. I think one of the big things that people are starting to focus on is what actually happens when you get to retirement, and you know you have worked hard and saved and you wind up with a nest egg.

Then the question is, well, how do I spend my nest egg? And that can be challenging, right? Because you may not know how long you're going to live, you may not know what the markets are going to do, you may not know your expenses. And so, you've got to figure this out. And that's one of the things we're very focused on, is how do we help people in that part of retirement?

Liz Koehler: So, look, I think this idea of retirement can be scary for a lot of people. It brings about a lot of big questions, big thoughts. And it is very personal, but the good news is we're starting to see more and more conversations about people thinking ahead and planning ahead, and really thinking through what they want their retirement to look like.

And it's quite different. Some people may choose to keep working part-time or do something in a whole new chapter of their lives. One other thing I'll mention is there are generational differences that we're seeing for sure, in terms of what retirement actually means to different generations. So, it's, it's an exciting dynamic topic, but we should talk about it more.

Oscar Pulido: Liz, this sounds like the conversation you and I had in Australia about the differences between different generations. And Anne, what you touched on is what Larry Fink talks about in his letter that it, the, the rethinking Retirement. It's not just about saving for retirement, but also spending in retirement. But why don't we hear from the callers who have their very personal questions? And let's go to our first caller. this is Annabelle from Virginia.

Annabelle: Hi, I'm Annabelle and I'm a 28-year-old artist. Saving for retirement was never modeled well for me. And my question is how do I start planning for a realistic retirement when I'm juggling more pressing expenses like high rent prices and student loan repayments?

Anne Ackerley: Hi Annabelle. That is a great question. I actually have two adult children and one, my son is a musician and he's about the same age as you. So, I have had this conversation a fair amount, over the last few years.

I first would just want to acknowledge this is hard. You're starting out, you're working, you're following a passion. And as you said, you might have high rent, high expenses, student loan debt, and yet people will tell you, well, you need to start putting money away for retirement, even though that is way, way far off in the future. So let me make a couple of suggestions. One, I do think it's important to try to save as early as you can, as early and as often as you can.

So, once you have some money set aside for emergencies, which is pretty important, you never know, when you might have some kind of emergency, any small amount that you can begin to save is important because if you can put it into the market in some sort of investment, you can get that compounding over time and that, that is really important.

I tell my son all the time, 3% of your salary, if you could do it, do it, 4%, whatever you can save and get it into the market. If you're lucky enough and you're working for somebody who offers a 401k plan, I would say participate in the 401k plan. Try to get the match.

But if you are like 57 million Americans that actually don't get offered a workplace retirement plan, try to open up an individual retirement account, an IRA, put a little bit of money in it and invest in the markets, I do tell all my family and friends invest in a target date. You sound busy. You sound like you're doing a lot of things, and so a target date does it for you. It's age-based asset allocated, and it'll, takes risk when you're young and as you get closer to retirement, it will automatically take risk off the table for you look for things with low expenses, and that's probably the best way to get started.

Oscar Pulido: What about you, Liz? What would you tell Annabelle?

Liz Koehler: Yeah. Thank you so much, Annabelle for calling in. I would say a few things. One, continuing to be as intentional as you can be around budgeting and spending, and there are some great tools out there that can help. I think trying to focus on paying down that highest interest rate debt first can be really helpful.

I couldn't agree more with Anne on contributions and consistent contributions to those retirement accounts. And also, that just small steps and small amounts add up over time, right? Einstein called compounding the eighth Wonder of the world for a reason. Don't be afraid to review and revisit your plan just to make sure that you're staying on track.

And then I would say just maybe one more quick quote from Warren Buffet on investing. “We don't have to be smarter than the rest. We have to be more disciplined than the rest.”

Oscar Pulido: And Annabelle mentioned she's 28 years old and retirement is a long-term journey, so some of the advice that you're giving is really some basic tactics to take to invest for the long term. So, it's never too late. and Annabelle certainly has a long journey ahead of her still.

Why don't we hear now from our next caller, this is Evan from Arkansas.

Evan: Hi, my name's Evan. I'm 45 years old and I'm looking to make up a little lost ground toward my retirement. I recently turned my home into a short-term rental as a way to create more income. What I'm wondering is how to best invest that income to make up for lost ground. And the other question I have is what will I need to retire at 65, 20 years from now?

Liz Koehler: Great. Thank you so much. I would say just to get us started, consider maximizing those contributions to those retirement accounts. 401Ks IRAs, if you want some of those additional tax benefits. Roth IRAs, Roth 401 Ks, health savings accounts, all really great strategies. You said your 45, so keep an eye out for that 50th birthday when you can also do something called catch-up contributions.

The IRS allows for about a $1000 in IRAs and $7,500 for 401k plans, but they're called catch-up for a reason because a lot of folks are thinking as they approach retirement about what they can do to increase their savings and investing for the future. If you have a longer time horizon, thinking about more stocks in your portfolio could be a good strategy.

But you want to make sure you stay diversified and think about managing the risk overall in your portfolio and maximizing those savings. It sounds like you're doing that. but again, thinking about the power of compounding and using different strategies to maximize your savings. And then I'll just say it again, like revisiting, reallocating, funds to make sure you're staying on track and sticking with your plan are all pretty important.

Anne, I'd love to hear your thoughts.

Anne Ackerley: Sure. Well, Evan asked one of the hardest questions, I think, which is, how much do I need? And obviously that's something that everybody thinks about.

So, what I would say, Evan, is there is no one answer - a magic number. But I think if you begin to think in annual, expenses. What do I spend annually or what do I spend monthly? That can help you start to think about, well, if I need, and I'll make this number up, $30,000 a year to live on. You can use a calculator, there's tons of them on the internet, to back into at 65, how much money would I need?That can begin to give you a sense of, am I anywhere close to that number or am I not close to that number?

Another thing I would say you want to factor in that you will probably be eligible for social security at age 62, that's the minimum age that someone can take their social security. If there's any way at all for you to delay that even up to the age of 70, those payments increase. And it's a big increase. The difference between getting social security at 62 and getting it at 70 is something like a 77% increase in a monthly payment. So, trying to factor into that thinking too.

I mean, you're only 45, so you're ways away from that, but your social security payment plus this monthly income that you can generate from your nest egg is really starting to give you a sense of what your annual income would be in retirement and is that enough for you?

And if it isn't, then you'll want to start to make some adjustments and you've got, time to do that. I'd also say, as we're living longer, starting to think about, well, maybe 65 isn't the age, or 62 isn't the age, maybe you will want to work longer. That's obviously a personal thing and up to everybody. But as we live into our nineties, maybe even a hundred, we might want to extend our working life, have that next chapter that could be different.

Oscar Pulido: And you mentioned income a few times. You even mentioned that at the very beginning of the retirement landscape and that need to spend in retirement. So, let's say a little bit more, I know this has been an important topic for you, this concept of retirement income?

Anne Ackerley: Sure. Well, we know the number one financial fear in the United States is the fear of outliving your money. We do a survey every year called Read on Retirement. We have over 60% of the people who respond to that fear, outliving their money. And so, we have spent a lot of time thinking about, is there a way to give people lifetime income? Some sort of income that they can count on every year.

And we've come up with a solution today, it's only available in 401k plans, but I would say to Evan, you know, we know that employees want it. We know that employers want to try to provide some sort of lifetime income. So, if you're working for an employer that has a plan, ask them, are you going to offer, you know, some sort of lifetime, monthly income and then invest in that?

Oscar Pulido: Well, you've given Evan a lot to think about. Liz, you gave him an early, birthday present, 50th birthday present with some good advice on Catchup contributions. And, and Anne, you mentioned a few things, which was just budgeting, thinking about. What those expenses are going to look like in retirement so that he has a better sense of what is that number that he needs.

You also talked about delaying social security payments. That's a way to actually then, bump those up if he were to delay them. But let's go to our next caller, because that was Evan. we're going to stay in Arkansas, but this is Laura from Arkansas.

Laura: Hi, I'm Laura. I'm from Arkansas. I am divorced. While I was married, I was a stay-at-home mom. Now that I'm back in the workforce, I want to start planning for my financial future. Where should I start?

Liz Koehler: I'm happy to kick us off here. first of all, please don't be discouraged, right? It is never too late to start investing for your future. So that's a really important message to, to make sure that you take away. Few thoughts. One, I would say a great place to start that we talk about is starting by gathering a lot of your financial documents just so you have them all in one place and you have a sense for what you have, right?

So, whether it's investment accounts or insurance plans or estate documents, just great to have them to be able to review and assess. then I think from there, being able to assess your plan and think about your goals, you know, what are your short-term goals, what are your medium and long-term goals? A lot of times an investment professional can really help with that, thinking through what those goals are, and then also being an accountability partner.

And then I would say the investment piece, right? And then again, we've talked about it's small steps, it's getting started, it's being consistent, but it can really add up over time and being able to review and evaluate and I would just say, I think I've heard this, that the best antidote to anxiety is often action.

And so sometimes it is just taking that next small action to see what you have, assess, make goals, and get started. But Anne, I don't know what you'd add?

Anne Ackerley: Well, I think I would add that this often can be challenging for women, whether women have been staying at home and are divorced or they go back to work, they're often responsible for caregiving, whether it's for children or for elderly. And so, saving for retirement can, can be challenging.

I think you gave a lot of great advice. I guess I would also just say, talk about it. One of the things, we don't tend to talk that much about money and finances in this country. I think, people get nervous about it. But you might have friends, family, if you have questions, try to ask people. And I think as you said, small actions sometimes can just get you started. Women tend to be less confident about investing. I would say ask questions, start small and, you'll be okay.

Oscar Pulido: And Liz, you said that don't be discouraged. it's never too, late to start. And again, just as some practical advice that, is consistent with what you've also said to Evan and Annabelle, but, starting small, over time that that pays dividends. So, let's go to our, next caller. this is Mike from California.

Mike: Hi, I am Mike. One thing to hear a lot about is diversification when it comes to retirement, and I would like to know what are the most effective ways to diversify while saving for retirement?

Anne Ackerley: So that's a great question. diversification, critically important. I'm sure you've heard that, age old saying, don't put all your eggs in one basket. And that can apply to a lot of different times and things in our life.

Diversification means not investing in just one thing. As I said earlier, you know, I'm a big fan of the target date fund. It's age-based, it's asset allocated. It allows you to take risk when you're young. My view is people are very busy and unless you love investing and lots of people do, and lots of people do it themselves, but there are solutions out there that can help you with all that diversification and essentially do it for you.

But I know, Liz, you have some ideas on asset allocation and diversification?

Liz Koehler: Yeah. Thanks Anne. I couldn't agree more with what you said. And maybe just to expand a little bit on this notion of diversification, a few different ways to think about it. One could be the types of securities that we invest in. Stocks, bonds, cash, alternative investments.

Another could be geography, right? US. International another could be the types of sectors or industries that we invest in, whether it's technology, healthcare, et cetera, or the types of strategies that we actually use.

So, there's a lot of different ways to think about diversification. It all matters, it's all important and I'm really glad you're asking the question. and just one other illustration that we sometimes use as we're thinking about diversification is this idea of, of pencils. You're probably laughing, but I'll explain. so, if you invest in one stock, for example, for a long time, think of it as holding one pencil in your hand, but then you think about investing in a number of securities. Could be stocks, could be bonds. A group of them think about holding a whole bunch of pencils in your hand. The idea simplified is that that bunch of pencils is a lot harder to break. It's stronger, including through different. In this case, market cycles, let's say. And so just one way to think about the power and the importance of diversification as it relates to managing your risk and hopefully getting a better return over time.

Oscar Pulido: The good news is Mike started by saying that he's heard a lot about diversification, so it sounds like he's hearing the correct message. And then both of you reinforced that and Anne, you touched on target date funds being one of the ways that he can implement that in a practical manner.

And then you used the word busy, I remember when we last spoke or one of the last times we spoke, you use that word a lot, that people are busy. There's just a lot of things going on in day-to-day life and planning for retirement can just be one of them. So, if you can find ways to simplify the journey, try to take advantage of that.

Well, I'm Oscar from New Jersey. I also have questions about retirement, but maybe I'll ask them to you at a separate time. I imagine many others will approach you seeking out your sage advice. Anne and Liz, thank you so much for, sharing this advice and thank you for doing it on The Bid.

Anne Ackerley: Thank you.

Liz Koehler: Thanks for having us.

Oscar Pulido: Thanks for listening to this episode of The Bid. If you've enjoyed this conversation, check out our episode entitled Women in Investing Strategies for Financial Empowerment, and subscribe to The Bid wherever you get your podcasts.

<<SPOKEN DISCLOSURES>>

This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener.

For full disclosures go to Blackrock.com/corporate/compliance/bid-disclosures

MKTGSH0724U/M-3658779

174. Larry Fink on Retirement

Episode description:

For more than a decade, Larry has written an annual letter not only to focus on critical long-term issues but also to start a conversation about finding solutions. This year, Larry Fink, CEO and Chairman of BlackRock is considering the challenge of retirement, why it has become an increasingly difficult proposition for too many, and what opportunities exist and will be developed to help people achieve their financial freedom.

Written Disclosures in Episode Description:

This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener.

For full disclosures go to Blackrock.com/corporate/compliance/bid-disclosures

TRANSCRIPT:

<<THEME MUSIC>>

Oscar Pulido: 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 Oscar Pulido. Joining us today is our CEO and Chairman Larry Fink. For more than a decade, Larry has written an annual letter, not only to focus on critical long-term issues, but also to start a conversation about finding solutions.

This year, Larry is considering the challenge of retirement, why it has become an increasingly difficult proposition for too many, and what opportunities exist and will be developed to help people achieve their financial freedom. Larry, welcome to The Bid. Larry, thank you so much for joining us on The Bid.

Larry Fink: It's wonderful to be here and be a participant in The Bid.

Oscar Pulido: So, Larry, it's, it's that time of year again. It's the time of year where you release your annual chairman's letter, and this is a letter that you write to raise attention to the issues that you think. Deserve more attention over the longer term. The letter goes to investors, to company leaders, to governments, really to a wide array of stakeholders.

And the letter this year focuses on retirement and specifically rethinking retirement. So curious to hear your views over the last few years. How has the retirement landscape changed and why is this an important issue right now?

Larry Fink: Well, let me just comment on the context of letters. they're getting much harder to write. but over the course of 2023. The conversations I was having worldwide was an elevation of conversation related to retirement. And how, not just in the US but other countries have to think about retirement and a whole different way. It has been evolving, and the raw reality is as we moved more and more to a defined contribution framework, we did not elevate financial literacy at the same time. A defined contribution puts a responsibility on the individual. A defined benefit plan puts the responsibility on a corporation of government.

And so, as we have evolved the retirement system, I think the inadequacies of financial literacy now is really having a demonstrable impact, on how people live. And part of my letter, I talked about hope and fear as we see in so many of the developed economies, the aging of populations which I've mentioned, people are getting closer or nearer to retirement. In so many instances, they just don't have the adequacy of savings to live in retirement in dignity, specifically in the United States. Social Security, which is a foundation of retirement, but it is only one part of having a retirement where you could live in dignity. In actuality, if all you are is dependent on your social security, by definition, if that's the only source of your income, you're living in poverty, if you had no other savings.

And so, when we designed our system, we had these three pillars, four pillars, to really try to ensure that there's adequacy when we are focusing on retirement and adequacy, that we could live in retirement with dignity. That is being lost by many people. And in fact, in the United States, as my letter suggested, we're talking about a substantial level of the US and my letter doesn't have good answers for those people it's a very large, policy issue that we have to address as a country. And I try to stay away from policy issues in the country and in every country. The letter was suggesting conversations, and I think that's the most important thing.

In building BlackRock over these years and throughout my entire career, I remain to be an incredible optimist I'm actually more optimistic about the future than ever before, despite all the pessimism we're seeing and more importantly as we read our news sources, the preponderance of information that we're reading today is just full of awful negative things. A lot of people get frightened about reading how terrible things are. actually, I get a little more optimistic about it. Because they're in front of us, and generally we solve problems. We build a better future by addressing our problems. When we address them, we fix them, we improve from them. Sometimes it takes way longer than we ever wanted it to be, but let's be clear, we do improve.

If you look over the course of my career, how the US has improved and other countries have improved, being an optimist, especially in financial markets, have proved to be a good outcome. Being a pessimist out of any one periodic time you may have good success, but over the long run.

I believe in capitalism, that in the long run it's the best, economic model in the world. But what disturbed me as I wrote this letter, we never talk about retirement. It is not a conversation we're having, and that is why it's becoming a bigger and bigger problem. If individuals had better information on how to navigate it over their 30- or 40-year journey of work, they then can build the adequacy.

And then importantly, in my letter and we talked about Life Path Paycheck and to me that is the biggest transformation for defined contribution plans where we transformed what typically is in a defined contribution plan when you retire you get a lump sum, most people have no idea what to do with that. And importantly, people really are concerned about, what is my monthly paycheck?

By the annuitizing of the backend, you are receiving a monthly payment. And that's why we call it Life Path Paycheck. And so that gives you a lot more understanding of, okay, here's my cashflow, here's what I can afford, also we have created, a digital experience in which we could show you if you add $10 more a month to your retirement, what can that do to the ultimate outcome? In addition, we could show you should you retire at 60 or 62 or 65 or 67 or 70, what that other outcome will be, how much money would you have on a monthly basis? So, all of it in my mind, helps the journey of accumulation for retirement.

It informs the participants in a whole new way. It provides more certainty, and through more certainty, it creates more hope and less fear. And I believe this is going to be the key characteristic of retirement.

So, all of this is about education informing with a real purpose of providing more hope for more people in the world so they could have more dignity in their life. and with more dignity, you know, what happens? People actually consume more, it's good for the economy.

Oscar Pulido: And Larry, as you said, you're trying to start a conversation on retirement and you're certainly doing that. And part of the reason you, I think, feel some urgency is you mentioned aging populations, which we've actually spent some time with colleagues from the BlackRock Investment Institute talking about this exact topic. There's a fear that on the part of companies and governments, that as the population ages, particularly in the developed world, it drags on economic growth, it drags on productivity. In your letter though, you've used the word hope. You say that you have more hope for the future, and that, in particular, the capital markets have a role to play in helping investors save for retirement. So maybe you can talk a little bit more about that as well.

Larry Fink: The US has been blessed by the ingenuity in the financial markets to create the most substantial, capital markets of any place in the world.

And one of the foundations of what the capital markets have done to the majority of people in the United States was if you are in need of a home mortgage, that home mortgage is not sitting at that bank or that institution that it was originated. It is packaged into a mortgage-backed security, and it's part of the capital markets.

The reality was the capital markets drove down the cost of mortgage finance, and that is the beauty of the capital markets. That we have a country that has a strong banking system and a country that has strong capital markets generally are the most robust economically. And the United States has the most robust capital markets. If you think about the markets in 2008 and 2009, during the great financial recession, there was a lot of fear. If you look at the rebound in the United States post 2009, was far faster here than any region in the world.

In the United States we had the capital markets and so as the banks were told that they have to raise their capital standards as other banks were trying to rehabilitate their balance sheets out to the financial crisis, more and more economic activity, flowed to the capital markets. And that is the main reason why we rebounded as a country faster than Europe, faster than anywhere else in the world. And it actually took Europe five to seven years longer than the U.S. to rebound because they have a much weaker capital market.

In addition, getting back to my conversations about retirement worldwide. Most policy makers are looking at the United States capital markets with true envy. They're witnessing that U.S. Corporations generally traded at two to four, multiple point higher than in Europe and other places, and much of it has to do with the retirement system here in the United States. And the U.S. investors are willing to put more of their savings into equities. They have more hope. As I said in my letter, if you're fearful of the future, why on earth would you put anything in a long-dated asset? You'd keep it all in the bank.

So, one of the big observations is the US economy has historically just been more hopeful than most places in the world and so in my conversation with many of the governments, they're now saying, how can we develop our own capital markets link to a retirement system because they want to build out their corporate champions, they want to build out their economy. They see the magnificence of our mortgage securities market and how that brought down the cost of home ownership in terms of mortgage rates, all of this. And so, the conversations we're having related to the development of the capital markets, with the retirement is totally linked.

Now, if I may, let me go back to this whole concept of aging and technology. And I've had conversation with the heads of state on this issue, especially the heads of state of declining populations. It is imperative that these countries embrace AI, robotics, and new sensor technologies. This is the only way these economies going to be able to grow and be more productive is to be advancing AI and technology even more rapidly. So, if the estimates of how powerful AI can be we can build and increase productivity in these countries with a smaller population. And if you can build productivity through technology, actually the wealth of the declining population grows up.

And so, to me, we need to be embracing technology more than ever before. And to me, this is going to be a very interesting dilemma and paradigm; how each country is going to be navigating the expansion of technology in their own society, and how does that play out with a growing population versus a declining population. So conventional wisdom has always been declining population is bad. I could make a statement if you are a big believer in the advancements in technology, a declining population actually makes the advancements of technology within the society easier to do. And the advancements of technology can most certainly elevate productivity, and when you elevate productivity will elevate wages. That is one of my futuristic views. but it's all interconnected.

Oscar Pulido: Well, and I'm glad you raise AI technology because actually in the letter. You know, the other big topic that you discuss is the urgent need and focus around infrastructure. So, you know, you mentioned AI. I think about topics that we've covered on the podcast, like cryptocurrency, there's a whole host of new technologies, Larry, that are changing the way we live and work, but they also change the physical world in terms of how we consume energy, in terms of how we think about transportation.

So, coming back to this topic of capital markets, which is sort of a common thread throughout the letter. What is the role that you think capital markets are going to play in funding the infrastructure needs of the future?

Larry Fink: In my letter, I talk about deficits and the debt, GDP with some other countries. And I don't believe fiscal stimulus is going to be as broadly used as they have been for the last 23 years. In fact, I would argue the fiscal stimulus is these deficits that are being accumulated by this country and other countries. But more importantly, the U.S. are at unsustainable levels.

Getting back to growth, the only way we could get out of these deficits is growth. How are we going to grow? We need to be focusing on more public, private type of deals, pipeline, the financing of any new technology, digitization, power grids. it's going to be financed through the private sector, through the capital markets. If you understand the cost it's going to take to digitize an economy to decarbonize at the same time, making sure that you have adequacy of power at any given moment. I talked about energy pragmatism, so you have to have both hydrocarbons and more sustainable, energy sources.

But I do believe the role of infrastructure. Because the enormity of costs in doing this We're just going to be hitting the J curve where this is going to be very much accelerated, and this is one of the reasons why I'm so bullish. The amount of capital that's going to be necessary to build this out, it's going to continue to stimulate the economy.

One thing we've learned most recently that with all the AI's potential, at the present technological level, it is really costly. The algorithms to do AI require so much power. These new data centers are going to be responsible for ab absorbing as much power as a small city, and we're already witnessing energy shortages, power shortages. If we are going to reach the full potential of ai, that means we're going to have to develop better power grids, we're going to have to have much better sources of power, and all of that is just very expensive. The role of the private sector through the capital markets can play an enormous role in this. It doesn't have to fall on the backs of state and local government financing or federal government financing.

And so, we are seeing tremendous opportunity. Even this past week, the conversations I'm having on the intersection of power in AI, the reason why we're having all these conversations, everybody who is thinking about this dilemma, We need capital to do this. We need hundreds of billions of capital to pull this off. And now if you overlay the whole idea of decarbonization, we need to develop new technology to bring down the green premium or we'll never decarbonize.

And so, the amount of capital that's necessary is enormous, both here in the developed world and in the developing world. This is probably one of the more exciting parts of the overall global capital markets, how we are going to move society forward both in a way of having adequacy and power and developing relatively cheap power from non-carbon-based sources. The fundamental problem of non-carbon-based sources like wind and solar, it's intermittent. We can't afford just to have intermittent supply. So, the need for Consistency and power, dispatchable energy, having energy flowing all the time, and the amount of capital that's going to be needed to do all this here in the United States, but everywhere else in the world is going to power the global economy is going to be the next horizon. And all of this is just so exciting.

Oscar Pulido: Larry, you've used the word hope a lot in your comments, and you've talked about how, despite all the headlines that can at times seem scary, you're optimistic. So, what is the message that you want to send to the younger. Generations maybe, who are just starting to invest and thinking about the future and also, to the pre-retirees who are maybe just at the front end of starting their retirement?

Larry Fink: Focusing on the long term, not the moment, think about your objectives and your game plan to me is critical. We built BlackRock in the idea of focusing on the long term, focusing on big macro trends over tens of years. Being in the market all the time is really important. there are a lot of people who were good at market timing, okay? Then you could go in and out of the market. But the majority of people have no ability to market time. And this is why we constantly try to remind people your liability is 30 to 40 years. You need to be thoughtful about that. It's not about the ins and outs of the markets, and I know the financial press talks about the markets today, what's hot, what's not? It's all garbage. It doesn't matter. What matters is being consistently in the market, consistently investing for the long term is going to have a far better outcome.

Oscar Pulido: Larry, it's always good to hear what's on your mind. I have to say, I was actually struck by the very beginning of your letter where you tell a personal story about your parents and how they meticulously saved and invested for retirement. So, I know these are important issues, and in particular helping others, save and invest for retirement the way your parents did. Thanks for starting the conversation, and thanks for doing it here on The Bid.

Larry Fink: Thanks for having me, it's great to here.

Oscar Pulido: Thanks for listening to this episode of The Bid. If you've enjoyed this episode, check out the episode. Larry Fink on the Power of Capitalism.

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