What the US Could Learn From Australia’s Retirement Savings System

When President Donald Trump told reporters in December that his administration was looking “very seriously” at Australia’s retirement savings system, he gave new political energy to a debate that has simmered in policy circles for years.

Australia’s superannuation program—a compulsory, employer-funded savings system that now holds roughly AUD 4.5 trillion—is routinely cited as a model the US should emulate. Under this system, employers must contribute a set percentage of workers’ earnings into employee-selected retirement accounts that generally stay with them throughout their careers.

The bipartisan appeal in the US is unmistakable. Treasury Secretary Scott Bessent praised the system at a Washington superannuation summit in early 2025, and Teresa Ghilarducci, a labor economist at the New School for Social Research and one of the country’s most prolific retirement policy voices, co-authored a 2021 proposal with conservative economist Kevin Hassett, now director of the National Economic Council, heavily inspired by the Australian model.

Calls to adopt an Australia-like model stem from the US retirement system’s clear structural flaws that policymakers and economists have been grappling with for decades: inadequate retirement savings for low- and middle-income savers, more than 50 million workers who lack access to an employer-sponsored retirement plan, and the risk of Social Security insolvency. The logic of looking abroad for solutions seems compelling, but does it hold up under scrutiny?

How Taxes Shape Australia’s Retirement System

After more than three decades of compulsory superannuation, Australia’s retirement outcomes tell a more complicated story than the headlines suggest. Roughly 62% of Australian retirees still receive the means-tested Age Pension in some form, with approximately two-thirds of those receiving the full rate—a level available only to those with very limited savings. Clearly, this is not a system that has solved retirement adequacy, as after three decades of compulsory contributions, a majority of retirees still depend on public support. Rather, it has built an enormous accumulation infrastructure while leaving significant adequacy gaps unresolved.

The system’s tax concessions are a major part of the equation. Superannuation earnings in the pension phase are entirely tax-free. Contributions are taxed at a concessional 15% rate versus marginal rates of 30% to 45% outside the system. Concessional contribution caps allow high-income earners to build balances of AUD 2 million to AUD 3 million or more in tax-advantaged accounts. The total annual cost of these concessions runs approximately AUD 50 billion, with the top 10% of income earners capturing roughly 40% of the benefit. Meanwhile, the bottom 20% of income earners receive less than 5% of total tax concessions. This is, in effect, regressive wealth-building infrastructure dressed as retirement policy.

The coverage-plus-compounding equation that advocates cite also requires conditions that are far from guaranteed: sustained labor force participation, real wage growth, reasonable fees, competent investment management, and effective strategies for turning accumulated savings into retirement income. Independent reviews show that net investment returns and fees vary widely across funds and products, meaning that investment management outcomes are far from uniform.

Do Superannuation Funds Outperform US Plans?

Proponents of Australian superannuation frequently cite superior investment returns as the system’s most compelling advantage. Large industry funds have delivered strong long-run nominal returns—their scale, governance structures, and exposure to infrastructure and private assets are genuine strengths. But the comparison is less straightforward than advocates suggest. Australian super funds typically carry significantly higher equity and alternatives allocations than US defined contribution plans, therefore making true risk-adjusted comparisons difficult to establish with confidence.

The more meaningful comparison is between institutional-grade US plans and Australian super funds, not between super funds and fragmented retail IRAs. When that lens is applied, the performance gap narrows considerably. Fee comparisons are similarly complicated: Super fund fees often embed performance fees, asset-based administration costs, and underlying manager charges that are not always reflected in headline figures. The valuations of unlisted infrastructure and private assets—a distinctive feature of Australian portfolios—are based on periodic appraisals rather than daily market pricing, which tends to smooth reported returns and dampen measured volatility. Ultimately, this creates the appearance of superior risk-adjusted performance without fully capturing underlying volatility. None of this means Australian funds are poor stewards of capital. But it does mean that investment performance, even taken at face value, is a weaker argument for wholesale adoption than its proponents claim. More fundamentally, a system’s success should be measured not by fund returns alone but by savings rates, coverage, leakage, and decumulation outcomes.

Structural Gaps in Australia’s Retirement System

Several critical weaknesses in the Australian system rarely surface in the American discussion. First, decumulation remains largely unsolved. Despite the introduction of the Retirement Income Covenant in 2022, most Australian retirees default to account-based pensions with ad hoc drawdown strategies. There is no mass-market longevity pooling, minimal annuitization, or persistent sequencing risk. Thirty years of policy effort have built an accumulation machinery while leaving retirees to navigate the most complex financial decisions of their lives largely on their own.

Second, superannuation reflects and amplifies labor market inequality. Women reach retirement with balances 30% to 40% lower than men, driven by career breaks for caregiving, higher rates of part-time work, and persistent wage gaps. Workers with broken employment histories are not rescued by mandatory contributions. Their disadvantages are embedded in their final balances.

Third, means-testing creates perverse incentives. The Age Pension’s means test excludes the family home, often the retirement saver’s largest asset, creating systematic incentives to overconsume housing and underfund liquid retirement savings. This is an integration failure at the policy design level that distorts household decision-making in ways the American debate rarely acknowledges.

Finally, the administrative complexity is substantial. The Australian system encompasses more than 16 million accounts across roughly 100 prudentially regulated funds and over 600,000 self-managed superannuation funds, with significant compliance overhead and ongoing member engagement challenges. The resulting choice architecture generates advice gaps that most members cannot effectively navigate. Given that the US has a population nearly 13 times larger, importing a similarly complex compulsory system would likely magnify these administrative burdens, compliance costs, and advice gaps on a significantly larger scale.

Could Australia’s Superannuation System Work in the US?

The honest answer is that the political economy of Australian superannuation is not replicable in the American context. Australia’s system emerged from a specific historical bargain in the 1980s: Trade unions accepted wage restraint in exchange for employer-funded retirement contributions, negotiated through a centralized industrial relations framework that has no American equivalent. The Superannuation Guarantee was then legislated in 1992 to universalize what had begun as a union-negotiated benefit.

A plan mandating 12% employer contributions in the US will likely never happen. And the political forces that sustain Australia’s system (for example, employer preferences for defined and capped obligations, fund managers incentivized by growing assets under management, member demands for liquidity and control, and government reliance on Age Pension eligibility as a political release valve) have collectively prevented the kind of integrated reform that would actually solve adequacy.

True retirement security integration would require coordinated means of testing across housing, financial assets, and income; retirement income products with genuine longevity pooling; and progressive contribution structures or credits for workforce absences. None of this has happened in Australia. And this is not because of policy ignorance, but because of political economic constraints that are, if anything, more intense in the US.

Lessons From Australia’s Superannuation

This does not mean the US has nothing to learn. The Australian experience powerfully demonstrates the value of universality, compulsion, and preservation—principles that state auto-IRA programs and Secure 2.0 provisions are beginning to incorporate.

But the US would be unwise to replicate Australia’s specific model, or to treat coverage and accumulation as synonymous with adequacy. The more instructive lesson from Australia is about what compulsory savings alone cannot do: They cannot correct for labor market inequality, they cannot solve the decumulation puzzle, and they cannot ensure that tax concessions flow to those who need them most rather than those who need them least.

The retirement challenge facing the US is real and urgent. Social Security’s fiscal trajectory, the erosion of defined-benefit pensions, and the inadequacy of voluntary savings for tens of millions of workers demand bold action. Australia offers a partial template, but also a 30-year warning about the distance between building wealth-accumulation infrastructure and achieving genuine retirement security. American policymakers would do well to study both sides of that ledger before importing a model that its own architects are still trying to fix.