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00:00 Speaker A
Americans are living longer than ever, which means retirement planning is more important than ever. Every day, 11,000 Americans retire, so reliable and steady income solutions are becoming essential to make sure your income lasts. And joining me now with more on how to think about your retirement portfolio as we head into 2026 is Nick Nafusi, Blackrock Global Head of retirement solutions and head of Life Path.
00:23 Speaker A
And Nick, thank you for joining us here today. Um let’s start with, I know you were outlining in the notes today, two of the biggest risks for people facing retirement right now.
00:35 Nick Nafusi
Well, facing retirement is a good thing. So we want people to be excited about retirement. But two of the big risks that we see, one is market volatility. That’s always a risk and that leads to behavioral risks. The other risk that uh we see a lot now because most people are relying on a 401k plan, not a pension plan is really income in retirement and the consistency of income in retirement.
00:54 Speaker A
All right. So, how do we take that knowledge and structure it into a solution, especially as we think about, okay, we’re wrapping the 2025, looking ahead to 2026, etcetera, potentially more volatility as you just mentioned.
01:10 Nick Nafusi
Yeah, we do expect more volatility in 26, similar to what we saw in 25. However, we still expect growth to remain uh consistent, particularly in the US. So we saw the volatility around liberation day, but then we saw markets recovering. We’ve been accustomed to this.
01:21 Nick Nafusi
So because we’re seeing more of this macro uh trend following type stuff happening in the top down where you’re getting more policy coming in, more of this fiscal dominance, we do expect more volatility. The problem with volatility though is what you do with it. So the way that we structure our portfolios is we have a very simple concept of grow, protect, spend. So for the younger investors, we want to maximize growth. When you get to late career and approaching retirement, it’s about protection, and then retirement is about spending. So we want to take more risk out of the portfolios as you get closer to retirement, so hopefully, you don’t uh do something like sell out at the wrong time.
01:49 Speaker A
Yeah, I hear you. And just thinking about income then, uh a year ago, maybe two years ago, it was pretty it was pretty easy to earn 4 and a half% in a money market fund. Um now the Fed is cutting interest rates and investors are faced with some of the thoughts that they were having probably pre-temp pandemic. So remind us how we should be thinking about some of the shorter-term investment opportunities that especially if we need that in interest income.
02:18 Nick Nafusi
So we’ll take two. I’ll give you two different ideas here. One is we have to worry about inflation. We think inflation is going to stay sticky. So what that means is we have to look at things like inflation protected securities, shorter duration inflation protected securities. But the other thing, which I think is a bigger issue is even retirees have a 20 year time horizon. So retirement is a long time and we have to think about how do we get consistent income through retirement. And this is why we’ve launched products that embed insurance into the portfolios. This is a product that we have a strategy called Life path paycheck.
02:51 Nick Nafusi
And we want to do there is is really mimic what pension plans are able to do, which is provide guaranteed income for somebody’s life.
03:00 Speaker A
Interesting. So, uh dive into that a little bit more. How do these how does this insurance strategy baked in, uh how does that actually work?
03:06 Nick Nafusi
Sure. So, it’s built into a target date fund. Uh target date funds really take the guesswork out of investing. We start off with almost all equities when you’re young, and then we diversify into other more protection asset classes as you get older. One of those asset classes we use are institutional quality insurance contracts. So in Life Path Paycheck, if you choose to, you don’t have to, but if you choose to, you can convert those insurance contracts into guaranteed income for the rest of your life.
03:36 Speaker A
Talk to me about private markets. We were just having a conversation over the break. I got my start in broker dealer compliance at 30 years ago and private markets were something you could only uh give, you could only sell or even offer to limited to unaccredited or to accredited investors. You had to be basically, uh you had to have a certain net worth or have a certain income and those standards have been drastically pared back over the the last probably 10, 15 years. So how does what’s the state of the market right now for being able to sell uh some of these products that uh investors just have not had access to before?
04:09 Nick Nafusi
So think of the average uh pension plan has about 20% in private markets. The average target date fund, which is what most people are going to be in in a 401K plan has zero. So I think what you’re seeing in the market do now is we’re saying, why don’t we have access to those types of investments? We can help diversify portfolios better, we can manage inflation, we can manage income better if we widen the opportunity set.
04:22 Speaker A
And it’s a pool. It’s not, you’re not dealing with idiosyncratic risk necessarily as an individual investor.
04:26 Nick Nafusi
Correct. The way that we would argue is you want to put those into the target date fund. Target date funds are low cost, professionally managed, diversified. This just increases our diversification ability and it simply just levels a playing field between a 401k plan and a pension plan with the goal of giving people better outcomes in retirement.
04:46 Speaker A
All right, we got about 30 seconds here. Any final words for investors, uh people potentially facing retirement in the new year?
04:54 Nick Nafusi
What I would tell you is there is the most amount of innovation that I’ve seen in the 20 some years I’ve done this in the last year and a lot of this has to do with some regulatory changes or softening. What you’re actually seeing are 401k plans beginning to look more like pension plans, which is good because we’re going to be able to deliver better outcomes both to and through retirement for the average American.
05:20 Speaker A
All right. Nick, really appreciate you stopping by here. We have to leave it there. Thank you so much.
05:26 Nick Nafusi
Thank you.