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The world\u2019s most-envied retirement plan has another high-profile booster: President Donald Trump.<\/p>\n
Riding high off public enthusiasm for the\u00a0Trump Accounts for children, Trump last week\u00a0renewed his focus\u00a0on their parents and grandparents. And he said he\u2019s looking to Australia\u2019s private pensions, known as superannuation funds, for inspiration to reform the ailing US retirement system.<\/p>\n
The president has repeatedly praised the country\u2019s employer-funded, privately run system in recent months. But last week, he said he ordered Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick to study the model as part of their discussions with Congress about how to expand the US retirement system.<\/p>\n
\u201cThey have a plan in Australia, which people really like. It\u2019s really worked out very well,\u201d Trump said on July 6, when he also met with BlackRock Inc. Chief Executive Officer Larry Fink, a vocal champion of Australia\u2019s model for several years. \u201cWe\u2019re going to be talking about that with Congress and see if we can implement it.\u201d<\/p>\n
Asset managers and retirement policy experts alike often look with envy on Australia\u2019s rapidly growing $3.1 trillion retirement system. In the early 1990s, that country passed legislation that required employers to supplement workers\u2019 wages with contributions to privately managed pensions.<\/p>\n
The contribution rate has gradually risen to 12% of employee salaries, including for part-time workers. In total, the system is on pace to be the world\u2019s second-largest retirement plan within the next decade.<\/p>\n
Meanwhile, the US is facing its own retirement crisis. The Social Security trust fund is projected to be\u00a0depleted in 2032, which would require significant cuts to promised benefits. Outside of government benefits, most workers are woefully undersaved: Among the 5 million people in 401(k)-type plans administered by Vanguard, the median balance was just $44,115 last year. That\u2019s not even accounting for the roughly 40% of private-sector workers who don\u2019t have access to that kind of plan.\u00a0<\/p>\n
Read more:\u00a0Social Security Will Start Running Out Earlier Than Expected<\/p>\n
Fink wrote at length about the problems in the US in a\u00a02024 letter to investors, at the same time highlighting Australia\u2019s success. He\u2019s often praised the plan and urged US lawmakers to do more.\u00a0<\/p>\n
Against that backdrop, it\u2019s easy to see the political appeal of a model that mandates high contributions, expands coverage even to part-time workers, and shifts the responsibility for funding and managing the plans into the private sector.\u00a0<\/p>\n
Texas Senator Ted Cruz, who has been a vocal critic of the US Social Security system, applauded Trump\u2019s comments in a July 8\u00a0post on X\u00a0on July 8, calling them \u201cexactly right.\u201d\u00a0<\/p>\n
\u201cI\u2019m authoring legislation to ensure every American \u2014 from bartenders to gig workers \u2014 has the opportunity to build wealth, own a piece of the American Dream, and share in our nation\u2019s prosperity,\u201d Cruz said. \u00a0<\/p>\n
Retirement experts caution that Australia\u2019s system is no easy fix for the US. Even if the government wants to replace Social Security, it still has to figure out how to handle the benefits it\u2019s already promised \u2014 which it currently funds predominantly through payroll taxes.\u00a0<\/p>\n
Some officials have floated the idea of creating a \u201csovereign wealth fund\u201d that could be deployed to fund any Social Security shortfall, but that\u2019s not without its own \u201cimportant implications for the economy,\u201d said Gopi Shah Goda, director of the Retirement Security Project at the Brookings Institution.\u00a0<\/p>\n
And any compulsory employer contributions are likely to spark significant outrage from businesses. In Australia, corporations have argued that they divert money that would otherwise go to raises. (Researchers and economists\u00a0are\u00a0divided.)<\/p>\n
Read more:\u00a0Even Larry Fink\u2019s Favorite Pension Plan Has Retirees Worried<\/p>\n
\u201cMy view is that our system is better designed,\u201d said Alicia Munnell, a senior adviser at the Center for Retirement Research at Boston College. She pointed to the combination of privately managed 401(k)-type investment plans and the guarantee provided by inflation-adjusted Social Security payments, and noted that, just like in the US,\u00a0Australians are struggling\u00a0to turn their investments into income streams that last as long as they do.\u00a0<\/p>\n
\u201cWe know what to do,\u201d she said. \u201cFix Social Security and increase the percentage of workers who are enrolled in workplace retirement plans.\u201d\u00a0<\/p>\n
While Trump does like Australia\u2019s model, it\u2019s premature to say whatever is eventually developed would mirror that specific approach, a White House official said. Trump nodded to that in his most recent comments, saying that his administration would be \u201ctaking that, and we\u2019re going to be maybe making it a little bit sharper, a little bit better.\u201d<\/p>\n<\/div>\n
#Trump #embraces #Australian #retirement #system #backed #Larry #Fink<\/p>\n","protected":false},"excerpt":{"rendered":"
The world\u2019s most-envied retirement plan has another high-profile booster: President Donald Trump. Riding high off public enthusiasm for the\u00a0Trump Accounts for children, Trump last week\u00a0renewed his focus\u00a0on their parents and… <\/p>\n","protected":false},"author":1,"featured_media":11905,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[13289,11326,3393,13290,258,208,950,260],"class_list":["post-11904","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-news","tag-australian","tag-backed","tag-embraces","tag-fink","tag-larry","tag-retirement","tag-system","tag-trump"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/11904","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11904"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/11904\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/11905"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11904"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11904"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11904"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}