The average Australian will retire with a nest egg of more than $550,000 in assets, five times the size of the average U.S. worker. What would retirement in the United States look like if Americans adopted elements of the Australian superannuation system?
The Australian superannuation system, adopted in 1992, requires employers to contribute a percentage of pay (currently 9%) to an employee's pension. More recently, employees gained the ability to select the funds to which their employers contribute.
The system prohibits most access to superannuation funds before retirement and includes a catch-up subsidy of $450,000 over three years to workers over 50 because the 9% contribution requirement is fairly new.
The superannuation system is supplemented with Australia's "aged pension" social insurance system, which differs from Social Security in that each citizen's payout does not depend on how long he or she worked.
So how might this system translate in the United States?
Jane White, president of Retirement Solutions, proposed a new, Australian-flavored retirement strategy at a recent panel discussion held at The New America Foundation, a Washington, D.C. think tank.
White recommended a system that requires most employers to offer a 401(k) with a 9% employer contribution if they do not already offer a defined benefit plan.
Under her proposal, new and small companies would be exempt from the 401(k) requirement, and employees would receive a matching contribution from the government. The system would prohibit cashing out 401(k) funds during a job change.
Pamela Perun, policy director of the Aspen Institute's Initiative on Financial Security, suggested another alternative retirement system for U.S. workers.
The "Super Simple" system would be universal, user-friendly and designed to increase the retirement assets of low- and middle-income workers, Perun explained. The system would require workers and employers to make small contributions to pensions, which would be locked up until retirement.
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