President Donald Trump is still considering creating a retirement system modeled on Australia’s superannuation program, more than six months after he first mentioned the idea.
Australia’s retirement system requires employers to contribute 12% of employees’ pay into a retirement plan. Social Security, by contrast, requires employers and employees to split the contribution, with each putting in 6.2% of the worker’s pay.
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The president said his administration was working on a plan and would discuss it with Congress. He made his comments during a Rose Garden speech on Monday touting “Trump accounts,” which are newly launched investment accounts for children under 18. The Australian-inspired system “would be more for grown-ups, as opposed to children, but it’s something that’s going to be great, I think, if we can get it done,” he said. “And we’re going to try very hard.”
This is not the first time Trump has complimented the Australian retirement program. In December, he said his administration was considering “very seriously” implementing a similar system to Australia’s. The White House did not respond to a request for comment on Tuesday.
Trump has lately had his eye on Americans’ retirement plans. In his State of the Union address in February, he said he wanted to boost Americans’ retirement security. Two months later, he signed an executive order that would give millions of workers access to retirement plans if their employers didn’t provide one.
Critics argue the Trump administration should instead focus on fixing Social Security’s financial issues. The trust funds that support the system are expected to run out of money in about six years, at which point all recipients would see a roughly 22% cut to benefits, the latest trustees’ report found.
“Instead of toying around with federally seeded private retirement accounts loosely inspired by Australia’s public pension system, we would advise President Trump to focus on Social Security — a program that has worked splendidly for more than 90 years to provide Americans with basic retirement security,” said Max Richtman, president and chief executive officer of the National Committee to Preserve Social Security and Medicare. “Social Security can continue to play that role, but only if the president and Congress have the will to shore up the program’s trust fund and avert a large automatic benefit cut in the early 2030s if they fail to act.”
Retirement systems: Australia vs. United States
There are other differences between the Australian and U.S. retirement systems. Australia’s superannuation program invests those employer contributions into individual investment accounts, with the option for some employees to put in additional funds. Social Security, on the other hand, is a pay-as-you-go system, with all contributions placed in trust funds that pay out benefits to current retirees and other eligible individuals.
Australians have access to retirement funds after age 60 (or earlier, depending on a person’s birth year), while Social Security recipients become eligible for retirement benefits at age 62 (although claiming that early comes with a cut to the benefits that would come at full retirement age, which is 67 for those born in 1960 and later).
The American retirement system isn’t what it used to be, though. When President Franklin D. Roosevelt signed the Social Security Act into law more than 90 years ago, the program was intended to keep the elderly out of poverty. Social Security was meant to be one leg of a “three-legged stool” of retirement income, with the other two legs being workers’ own savings and their company-provided pensions. But in the past few decades, private pensions have all but disappeared, and many workers are not saving enough for retirement — either because they can’t afford to or because they haven’t prioritized it.
In Australia, people without enough money for retirement can participate in a means-tested pension program.
“The appeal of the Australian system to organizations ranking national retirement systems is that the main plan is fully funded and protected from demographic shifts, and the Age Pension ensures that no one falls below any adequate standard of living,” MarketWatch contributor Alicia Munnell, who founded the Center for Retirement Research at Boston College, wrote earlier this year.
