Trump said he’s looking into an Australian-style retirement program for America. Here’s how it works

[essentialsaltes]

President Donald Trump on Tuesday said at the White House that his administration is looking into an Australian-style retirement program.

“We’re looking at it very seriously,” Trump said. “It’s a good plan. It’s worked out very well.”

Superannuation, or “super” for short, is Australia’s flagship retirement savings program.

Employers are required to fund employees’ savings accounts, which are invested in select funds — known as super funds — that are locked up until retirement. The employer-funded contributions are made on top of paying employees their regular income. Employees can also contribute to their own savings account.

Employers must contribute the equivalent of 12% of an employee’s income into these super funds.

There is also a government pension program that serves as a safety net for people who need additional support. However, “super” is increasingly the primary retirement savings vehicle.

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An interesting idea, sort of a mandatory 401k, but of course we need a lot more details to see how this would actually work, and who the winners and losers are compared to existing Social Security. And exactly how the transition would be made.

The 12% is similar to the 12.4% paid into Social Security. Of course with Social Security it's split evenly between employer and employee, whereas this would fall all on the employer.

The main problem (as I see it) is that one's balance is directly proportional to income, and so the benefits will be as well. For Social Security, as I understand it, there is a formula used to help spread the pool out -- aiding lower income people. [On the flip side, the very wealthy only pay Social Security tax on the first $176K of salary.]

The main problem (as corporations see it) is that it (on paper anyway) shifts the entire burden onto them.

 

[Nithavela]

Sounds like maybe a good idea that will help people in a couple of decades.

 

[wing2000]

...curious to see what our Aussie friends have to say.

 

[Bradskii]

...curious to see what our Aussie friends have to say.

This one thinks it's excellent. My wife and I made a point of putting a little extra into our super fund over the years via what is called Salary Sacrifice. That's where part of your salary goes into your super and you don't pay tax on tax on it. So we retired with quite a decent amount. And we don't pay tax on the super fund when we access it.

Employers contributions are mandatory and you can pick your own fund managers or DIY. Our fund manager is doing a great job. We live very well on it. We've been drawing on it since we retired 7 years ago and there's actually more money in the fund now then there was when we retired. Not being able to spend it fast enough is just the sort of problem you want.

The federal pension is not accessible to us as it's means tested. So a decent super fund means you're totally self sufficient. That seems fair. If people do spend most of it (maybe I'll get that Harley and we'll start flying everywhere first class) then the government eventually steps in.