BlackRock clumsily reverse-engineers retirement

BlackRock

01/10/2026 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Sebastian  Pellejero
NEW YORK, Sept 30 (Reuters Breakingviews) - BlackRock BLK.N is trying to turn back time on US retirement funds. Companies used to give workers a guaranteed monthly check even after they punched out for the last time, but such defined-benefit plans have largely been retired themselves, replaced by 401(k) funds. As pensioners struggle to keep up without a job, the new idea is to remake their privately managed accounts into more reliable cash machines. More moving parts, however, make it harder to assess the benefit.
In mid-September, BlackRock, which manages some $15 trillion for investors, unveiled a framework that lets a broader range of employers tailor target-date funds to their workforce. They can choose an index-based or actively managed strategy, or a whole-portfolio approach incorporating private investments and lifetime-income options. Its LifePath Paycheck already lets workers choose to use some of their savings to buy an annuity at retirement.
Annuities are easier to justify, partly because of 401(k) shortcomings. They hold about $11 trillion, but money manager Vanguard found that just one in 10 retirees draws consistent income from them. Transferring the risk of outliving one’s savings to an insurer is an undervalued protection. Where available, they account for less than 1% of assets in funds that invest more cautiously as retirement nears, according to Morningstar. 
BlackRock is stuffing an annuity option inside more familiar target-date funds. Employees can use a portion of their balance to buy lifetime income, while leaving the rest invested elsewhere. By stripping out many traditional insurance charges, the idea is to make it cost about the same as an index fund, obviating the need to shop for protection separately.
Adding private assets is less compelling. With buyout funds struggling to sell companies and private credit funds restricting withdrawals, these strategies remain an unproven fit for individual retirement savings. Although the typical 401(k) returned less than 1% annually between 2015 and 2024, after adjusting for inflation, private assets have under-performed, too, Vanguard found. In the five years through March, the Cambridge Associates Private Equity Index generated around 9% a year after fees, compared to 12% for the S&P 500 Index .SPX. 
Providing pension-like regularity at a low cost would improve on the conventional 401(k). BlackRock also has shown it is capable of offering lifetime income without the high charges often attached to standalone annuities. Asking workers to navigate an even broader menu of risks, however, undermines the virtues of simplicity desired in retirement.
     
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CONTEXT NEWS
BlackRock on September 16 unveiled customizable target-date 401(k) funds with options to include slices of public stocks and bonds, private assets and annuities to provide guaranteed income in retirement.

(Editing by Jeffrey Goldfarb; Production by Maya Nandhini)
((For previous columns by the author, Reuters customers can click on PELLEJERO/ Sebastian.Pellejero@thomsonreuters.com))