Trump’s Australia Retirement Idea Is Not Social Security Privatization

Australia Has A Mandatory Account Layer

Australia’s system is not simply “private accounts.” It has three main pieces: a compulsory employer-funded retirement account, a public means-tested Age Pension, and voluntary private saving, including housing.

The piece Trump appears to like is the first one: superannuation. Australia requires employers to contribute to workers’ super accounts. The Australian Taxation Office lists the Superannuation Guarantee rate at 12% of qualifying earnings. Australia does not merely tell workers to save. It makes retirement saving part of the employment system.

The United States mandates Social Security payroll contributions, but it does not require employers to provide or contribute to a retirement plan. Workers and employers each pay 6.2% of covered wages into Social Security, for a combined 12.4%, up to the taxable maximum, according to the Social Security Administration. But the layer on top of Social Security is voluntary, uneven, and highly dependent on whether a worker has the right job.

The Australian comparison does not show that America should scrap Social Security. It shows that America’s second layer is too weak.

The U.S. Already Has The Annuity Australia Lacks

Here is the part people miss. The United States already has something Australia should envy: Social Security pays lifetime benefits. You cannot outlive it. That annuity feature is not a detail; it is the crown jewel. Annuities improve people’s mental life and raises the quality of old age.

Australia’s super system builds assets and achieves broad participation, but it has a retirement-income problem. Account balances can be spent down. Unless retirees buy or hold annuity-like products, they still face the risk of living longer than their money.

So the best American lesson is not “replace Social Security with accounts.” It is the opposite. Keep Social Security as the guaranteed lifetime floor and add a universal, portable account layer on top. Social Security provides longevity insurance. Universal accounts provide ownership, portability, and market participation.

Voluntary Saving Is Not Cutting It

The math is brutal. Social Security replaces about 40% of annual preretirement earnings for the average worker. That is essential, but it is not enough to maintain most workers’ living standards by itself.

Aon’s retirement adequacy study estimates that the average full-career worker needs total retirement resources equal to 16.4 times final pay to maintain preretirement living standards through retirement. Social Security covers the equivalent of 5.3 times pay, leaving a private retirement need of 11.1 times pay by age 67. A worker starting at age 25 needs annual private contributions of about 16% of pay, counting both employee and employer contributions. That is in addition to Social Security payroll taxes.

Now compare that target with the actual U.S. system. BLS reports that in March 2025 only 45% of civilian workers participated in a defined contribution retirement plan, and 50% of private-industry workers did so. Vanguard reports that among participants in its defined contribution plans, the average total contribution rate in 2024 was 12.0% of pay, counting both worker and employer contributions. That is below the 16% target even among people already inside a plan.

So the problem is not that Americans are uniquely irresponsible. The problem is institutional. We ask workers to save like Australians, but give them a voluntary 401(k) maze.

The Match System Rewards The Already Stable

The U.S. 401(k) match sounds fair. Put money in and your employer puts money in. But workers who cannot afford to contribute often get neither the match nor the tax benefit.

Research by MIT Professor Taha Choukhmane and coauthors finds that tax and employer matching incentives channel more benefits to workers who already contribute more, widening gaps by race and parental income. The match system is not neutral plumbing; it amplifies inequality in retirement wealth accumulation.

That is why a universal account cannot just be another optional account. It must be automatic, portable, simple, low fee, and supported for low-income workers.

The Retirement Savings for Americans Act Is Already Sitting There

There is already a policy model for this: the Retirement Savings for Americans Act (RSAA). Its lead bipartisan, bicameral sponsors are Sens. John Hickenlooper (D-CO) and Thom Tillis (R-NC), and Reps. Lloyd Smucker (R-PA) and Terri Sewell (D-AL). Their proposal gives eligible workers access to portable, tax-advantaged retirement accounts, with federal matching support for low- and middle-income workers.

The RSAA, in plain English is that workers without an employer plan would get a simple account that follows them from job to job. Employers would auto-enroll their workers at 3% of income. Everyone is in! Full- and part-time workers without a plan will now have one. There will be a 1% automatic federal contribution for low- and moderate-income workers, up to a 4% federal match, private ownership of assets, and simple, low-fee investment options modeled on the Thrift Savings Plan.

Trump’s April 2026 order establishing TrumpIRA.gov moves in this direction by seeking to expand access to retirement savings options and to prepare workers for the Saver’s Match. But a website is not enough. Australia did not get broad participation by building a website and hoping workers found it. Australia made retirement saving part of the employment bargain.

The conservative objection is that compulsory saving raises labor costs. That is true. Retirement costs money. The question is whether we finance it openly through wages, employer contributions, and taxes, or hide the cost until people reach old age with too little money.

The progressive objection is that private accounts can distract from Social Security. That warning is real. But the answer is not to reject universal accounts. The answer is to insist they sit on top of Social Security and never substitute for it.

America needs a fully funded Social Security system and universal retirement accounts. Not one. Both. Australia is not a model to import lock, stock, and barrel. It is a mirror. It shows what the United States refuses to admit: voluntary retirement saving cannot do mandatory work.

Appendix: What Forbes Readers Need To Know

1. What Are Trump Accounts?

Trump Accounts are tax-advantaged investment accounts for U.S. citizens under age 18. The IRS guidance on Trump Accounts says the pilot program provides a one-time $1,000 federal contribution for eligible U.S. citizen children born from Jan. 1, 2025, through Dec. 31, 2028, if an election is made and the child has a valid Social Security number. They are not Social Security. They are not a full blown adult retirement system.

2. What Is Australia’s Superannuation Guarantee?

Australia’s Superannuation Guarantee requires employers to contribute to workers’ super accounts. The current rate is 12%. From July 2026, the ATO describes the base as qualifying earnings. Under the old employer guidance, the relevant phrase was ordinary time earnings. For Forbes readers, the economic point is simpler than the terminology: Australia requires a real employer-funded retirement contribution.

The account generally follows the worker. The balance stays invested. The new employer can contribute to the same account. That portability is what U.S. workers need but often do not have.

3. What Is The Australian Age Pension?

Australia also has a public Age Pension. It is not the same as U.S. Social Security. It is tax-financed, noncontributory, and means-tested. Services Australia lists the maximum normal Age Pension rate at A$1,200.90 per fortnight for a single person and A$905.20 per fortnight for each member of a couple, before tax and including supplements.

But not everyone gets it. Eligibility depends on age, residence, income, and assets. Services Australia explains the income test and assets test. Age Pension age is 67 or older, and higher-income or higher-asset retirees can receive a partial pension or no pension.

4. How Is U.S. Social Security Different?

U.S. Social Security is contributory social insurance. Workers qualify through covered work. Benefits are based on lifetime covered earnings and claiming age, not on the retiree’s current wealth. The Social Security Administration publishes the taxable contribution and benefit base each year.

One-sentence comparison: Australia gives older people a tax-financed, means-tested public floor; the United States gives covered workers an earnings-related lifetime benefit.

5. How Much Do Workers Need Beyond Social Security?

Aon estimates that the average full-career U.S. worker needs total retirement resources of 16.4 times final pay. Social Security covers 5.3 times pay, leaving 11.1 times pay needed from private retirement resources by age 67.

Aon estimates that a worker starting at age 25 needs annual private retirement contributions equal to 16% of pay, including employee and employer contributions. Starting at age 30 raises the target to 20%; starting at 35 raises it to 24%. This is private saving on top of Social Security payroll taxes.

6. How Far Short Is The U.S. Voluntary System?

The BLS participation data show that only 45% of civilian workers participated in a defined contribution plan in March 2025. Vanguard’s 2025 report shows that participants in its plans had an average total contribution rate of 12.0% in 2024, including both employee and employer contributions.

A rough all-worker calculation shows the gap. If only 45% of workers participate and participants average 12.0% of pay, the economy-wide equivalent is about 5.4% of pay. That is not an official national average. It is a back-of-the-envelope way to show the order of magnitude. Aon says workers need about 16% in private saving from age 25. The voluntary system appears to deliver far less across the whole workforce.

7. Why Is The Employer Match Not Enough?

Employer matches help people who contribute. They do little or nothing for workers who cannot afford to contribute, are not eligible, or do not have a plan. That is why matching can widen inequality. Choukhmane and coauthors find that the current system of tax and employer matching incentives disproportionately benefits workers who already save more and groups with higher contribution rates.

The U.S. match system is not neutral. It rewards workers with stable jobs, disposable income, and good plan access.

8. What Would An American Hybrid Look Like?

An American hybrid would have five pieces: fully funded Social Security; universal retirement accounts for workers without good workplace plans; automatic enrollment; low-cost pooled investment options modeled on the Thrift Savings Plan; and a government match for low- and moderate-income workers.

That is close to the Retirement Savings for Americans Act model. It is also the best version of what an Australian-inspired system could mean in the United States.

9. What is the Key Take Away?

The question is not whether America should copy Australia. It should not.

The question is whether America should learn from Australia’s most important institutional lesson: if a retirement saving tier is necessary, it cannot be voluntary for half the workforce and still be called a system.

Social Security should be protected and fully funded. But Social Security alone was never meant to carry the entire burden of maintaining preretirement living standards for the average worker.

Trump’s Australia idea will be dangerous if it becomes a substitute for Social Security. It could be useful if it becomes what America actually needs: a universal, portable, funded account layer on top of Social Security. That is not privatization. That is building the missing second floor.