Would Trump’s Australian-Style Retirement Be Better or Worse Than the U.S. Plan?
Written by
Vance Cariaga
Edited by
Brendan McGinley
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President Donald Trump is weighing whether the United States should adopt an Australian-style retirement system that requires employers to fund their workers’ retirement savings accounts.
Trump said his administration is “very seriously” looking at the Australian system, CNN reported. He also called it a “good plan” that has “worked out very well.”
Whether it would work out very well in the U.S. is open to debate. Here’s a closer look at whether an Australian-style system would be better or worse than the U.S. system.
How Australia Differs
One of the key components of the Australian retirement savings model is its “superannuation” program. Under this program, all employers must contribute 12% of their workers’ monthly pay into a retirement plan, according to a blog from 401(k) plan provider Guideline.
Employees can also “top up” their contributions from their paychecks.
This differs from the 401(k) system in the U.S., which is optional for employees. However, U.S. workers do have mandatory taxes taken out of their paychecks to fund their Social Security benefits.
Why Australia Might Be Better
Australia gets generally high marks for its retirement system because it guarantees that working Australians build some kind of nest egg. This gives it an advantage over the U.S. 401(k) system, which is voluntary and therefore leaves people room to make the mistake of failing to save and invest. And while Social Security withdrawals from paychecks are mandatory, the program’s monthly retirement benefits are almost never big enough to cover all the bills.
“Australia in my opinion has an ideal state-sponsored retirement system,” said Dr. Robert Johnson, CFA, chairman and CEO at Economic Index Associates, professor of finance at Creighton University and co-author of “The Tools & Techniques of Investment.”
That’s mainly because of the way the system is set up.
“The fact that it is a substantial, compulsory system with choice is what distinguishes it for me,” Johnson told GOBankingRates. “Australians have broad choice as to how the assets are invested.”
He pointed to research from the Thinking Ahead Institute Global Pension Assets Study showing that Australia has the world’s third-highest ratio of pension assets to GDP at 146%, trailing only Switzerland (152%) and Canada (147%).
Australia also ranks high (7th globally with an overall score of 77.6) in the 2025 Mercer CFA Institute Global Pension Index.
The Mercer index benchmarks retirement systems across 48 countries, according to Holly Verdeyen, a partner and U.S. Defined Contribution Leader at Mercer. The U.S. ranked much lower, with a score of 61.1.
Verdeyen gives the Australian system high marks for the following:
- Mandatory, universal coverage
- Strong long-term outcomes
- Tax-advantaged compounding
- Reduced government burden
Why Australia Might Be Worse
One of the major hurdles facing an Australia-type retirement system in the United States is figuring out how to even get it off the ground.
“The difficulty in adopting this sort of system in the U.S. is what kind of transition could be made from the current Social Security system that requires current workers to fund retirees,” Johnson said. “Fixing the current retirement system will require political will, which seems to be in short supply in the United States.”
The Australian system also has its own shortcomings, Verdeyen told GBR.
“The system doesn’t require converting savings into income streams, which can lead to poor drawdown decisions,” she said.
She also cited “adequacy gaps” in Australia’s system, which suggests that “benefit levels could be better for average earners.” In addition, people who need to take time off to care for children miss contributions during those years.
Verdeyen said a full Australian-style retirement system “isn’t realistic in the near term” in the United States. However, the U.S. did adopt some “key features” in the SECURE (2019) and SECURE 2.0 (2022) Acts, such as Pooled Employer Plans (PEPs) and mandatory auto-enrollment and auto-escalation requirements for new plans.
“We’re heading in the right direction, just at a measured pace,” Verdeyen said.
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