Key Takeaways:
President Trump's interest in Australia's superannuation model highlights a looming US retirement crisis as Social Security reserves near depletion.
Social Security's Old-Age and Survivors Insurance Trust Fund reserves will run out in 2032, translating into a 22% reduction in benefits for nearly 73 million Americans over 65 by 2030, according to the 2026 Social Security and Medicare Trustees' annual report.
"Everybody who works in America should have a supplemental retirement system that sits on top of Social Security, so that everyone can save for their own retirement in a simple, safe, and portable way," Teresa Ghilarducci, a labor economist at the New School and author of "Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy," said.
The US retirement system received a C+ rating from the Mercer CFA Institute Global Pension Index, ranking 29 out of 48 global pension systems, while Australia's system earned a B+. The typical US worker has less than $1,000 saved for retirement, and nearly half of private-sector workers — roughly 56 million people — lack access to an employer-sponsored retirement plan, according to the National Institute on Retirement Security.
Australia's system requires employers to contribute 12% of eligible employees' annual earnings to privately managed super funds, a model that has shifted much of the pension burden from the state to the private sector. Australian government pension expenditures are projected to decline from 2.6% of gross domestic product today to 2.1% by 2060, while OECD average government spending on pensions is predicted to rise from 9% to 10.4% of GDP.
Private funding, public costs
The Australian system's core strength is its scale. About 35% of retired men and 23% of retired women rely on superannuation benefits as their primary retirement resource, and by 2050 half of all Australian retirees will be self-funded, according to government projections. President Trump has pointed to these results, saying in July that Australia's plan "has really worked out very well" after meeting with BlackRock CEO Larry Fink, who has promoted the model for years.
But the system carries significant regulatory costs. Australia's Productivity Commission forecast in 2018 that higher-than-average fees would cost the typical employee retiring at 67 about 12% of their superannuation balance. A 2024 Vanguard analysis found that while most Australians viewed superannuation as crucial to their retirement, they were unaware of how much super funds were charging. Heavy regulation of fund governance, auditing, and compliance — passed on to members as fees — reduces the size of future retirement payments.
Union influence and accountability gaps
A separate concern involves governance of industry super funds, which controlled more than 40% of Australian superannuation assets in 2025. Under Australian law, employers and unions appoint directors to ISF trustee boards under an equal representation model. Union membership in Australia has fallen from 51% in 1976 to 13.1% in 2024, raising questions about whether unions retain the authority to serve as legitimate proxies for workers.
The structure creates internal pressures for these funds to invest in industries with high union membership and has led to numerous former Labor Party politicians being appointed to senior ISF positions. Samuel Gregg, president of the American Institute for Economic Research, wrote that union-friendly US legislators would likely try to replicate similar arrangements in an Australian-style reform, creating "opportunities for union officials and ex-politicians to use their oversight positions to promote political agendas at the expense of retirees."
What US adoption would look like
Trump signed an executive order in May establishing accounts for private-sector workers without employer-sponsored retirement plans, directing the Treasury Department to create an online marketplace. Workers making $35,500 a year and married couples earning $71,000 can claim up to $1,000 in matching funds from the government under the Savers Match program, which is due to start in 2027 and provides a 50% match on retirement contributions.
Critics argue the administration should focus on fixing Social Security's financing rather than layering new programs on top of it. "To improve our grade, we must fix Social Security and increase the percentage of workers who are enrolled in workplace retirement plans," Alicia Munnell, a senior adviser at the Center for Retirement Research at Boston College, said. "Good as it is, Australia can't help us."
Ghilarducci cautioned that Trump's Australia idea "will be dangerous if it becomes a substitute for Social Security" but "could be useful if it becomes what America actually needs: a universal, portable, funded account layer on top of Social Security." With Social Security reserves projected to run out in just six years, the debate over which model to follow — and which pitfalls to avoid — is only beginning.
This article is for informational purposes only and does not constitute investment advice.
