America's Super Fund

TCW Group Inc.’s Katie Koch has said the next big risk is a “silver tsunami,” a wave of people who are living longer and finding that their retirement funds are falling short. BlackRock Inc.’s chief executive officer, Larry Fink, made it the focus of his annual letter to investors, saying that it’s time to rethink retirement. Apollo Global Management Inc. CEO Marc Rowan has made dealing with the retirement crisis a bedrock of how he builds financial tools for the future at his private-credit behemoth.

Ultimately, the money-management industry is largely run on the concept of retirement. But the industry writ large hasn’t evolved to meet the needs of tens of millions of Americans. That’s $38 trillion in traditional pensions, 401(k)-style plans, annuities and individual retirement plans that are still falling short.

One fix that has had a growing chorus of support across Wall Street: working past the typical retirement age of 65.

Yet there is one expert who believes this fix is flawed. For Bloomberg Markets Magazine, we spoke to Teresa Ghilarducci of the New School for Social Research. Alongside Blackstone Inc.’s former president, Tony James, she co-authored a version of a government program that could tap into markets in a bigger way. It looks something like the super fund in Australia, a retirement system that’s become the envy of the world. (Though, in some ways, that fund also still falls short of what’s needed.)

So here comes the next big fix. In recent months, a bill was introduced in Congress to make America’s super fund a reality. The Retirement Savings for Americans Act, or RSAA, would allow the federal government to match retirement contributions for low- and middle-income workers. It has gotten some support from both sides of the aisle.

Wall Street titans have long been critical of the US’s Social Security program. The Social Security Administration warns that its reserves are projected to become exhausted by 2037. Even the richest people in the financial industry still, in the back of their minds, worry that the widening divide between the haves and have-nots could rattle society in a larger way.

“If trends continue, inadequate retirement savings will cost state and federal governments a combined $1.3 trillion in increased spending by 2040,” lawmakers backing the RSAA said in a statement.

The RSAA is intended to encourage more Americans to save, given the planned tax advantage and federal matching program. It’s also an idea that could garner a lot of Wall Street support, given that it would ultimately be the likes of BlackRock and other big money managers that could be handling finances for America’s super fund.

In the world of federal spending, there are rarely win-wins. Maybe, just maybe, this could be one of them. To read the full interview with Ghilarducci, you can find it here on Bloomberg.com — and watch her full remarks here.

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More to come. Next week, I'll be off to spend some time resting before a very busy summer schedule. June 4th, I'll be speaking with the global head of equities at Citadel at Bloomberg's Hedge Fund Forum in New York. We'll air it on Bloomerg TV as well, so don't miss it. And we are getting much, much closer to the Bloomberg Invest summit on June 25-26 in New York -- it's been my heart and soul for the past year so definitely don't miss that either. Tips, opinions and ideas at [email protected]