Economists admire the Australian retirement system, which requires workers to participate in a savings program akin to the 401(k). President Donald Trump has said his administration is looking "very seriously" at the model.
What does that mean for the future of our own 401(k)s? And what about Social Security?
America’s retirement system is far from perfect, retirement experts say, and a big piece of it is in crisis.
Social Security, our national retirement trust fund, faces potential insolvency by 2032. And only about half of private-sector workers participate in the workplace retirement plans that are supposed to supplement Social Security.
Australia’s retirement system is different, and arguably better. Employers are required to pay 12% of worker
wages into 401(k)-style accounts for every employee. A national pension delivers extra income to retirees who don’t have enough income and assets to get by.
An international ranking of retirement systems, the Mercer CFA Institute Global Pension Index, gave the United States a C+ in its 2025 report. Australia got a B+.
"If you were inventing a retirement system from scratch today, you would almost certainly do something like the Australian retirement system," said Andrew Biggs, a senior fellow at the libertarian American Enterprise Institute, speaking to USA TODAY in July.
What's so great about retirement in Australia?
Australia’s retirement system is superior, Biggs and others say, because it protects retirees from poverty while requiring workers to save for retirement. And Australia "still ends up spending considerably less of their GDP on their program than we do," said Andrew Eschtruth, director of the Center for Retirement Research at Boston College, in a July interview.
Under America’s system, millions of workers save nothing for retirement. Social Security protects retirees from poverty, but at an unsustainable cost.
More money is going out of Social Security than coming in, and a once-plentiful cash reserve is dwindling. When the reserve runs out, if nothing is done, the federal agency will have sufficient funds to pay only about 83% of full benefits, according to an estimate from AARP.
Trump has repeatedly touted Australia’s retirement system.
"It’s really worked out very well, incredibly well and very respected," Trump said at a July 6 White House event to launch Trump Accounts, the federal savings program for children. "And we’re going to be talking about that with Congress and see if we can implement it," he said.
Why is Trump studying Australia's retirement model?
Trump hasn’t publicly stated exactly how the United States might tap Australia’s retirement model. But we can find hints in his executive actions.
Earlier in the year, Trump signed an executive order that will broaden access to retirement savings for workers whose employers don’t offer 401(k)-type plans. The order creates a new website, TrumpIRA.gov, that workers can use to enroll in a private-sector retirement plan. It calls for the site to be active by Jan. 1, 2027.
Trump’s order coincides with the coming launch of the Saver’s Match, a 2022 initiative of the Biden administration that delivers up to $1,000 a year in matching retirement contributions for lower-income workers.
The TrumpIRA plan is tailored to boost the share of American workers who save for retirement.
"The president wants to help everybody in the United States get a retirement account, like every Australian worker has a retirement account," said Teresa Ghilarducci, a labor economist at The New School for Social Research, in a July interview.
Access to tax-favored retirement plans is widening as more states introduce "automated savings" programs, prodding companies to offer retirement plans and enrolling employees automatically. Starting in 2025, most new 401(k) plans had to automatically enroll employees rather than leave the decision to them.
But that’s a far cry from requiring workers to save for retirement, as Australia mandates.
What if every worker was required to save for retirement?
Would forced retirement saving work in America? On that question, experts are divided.
Employers fund Australian retirement accounts. But "it’s misleading to say that it’s the employer contribution," said Romina Boccia, director of budget and entitlement policy at the libertarian Cato Institute, in a July interview. Ultimately, she said, "it comes out of workers' wages."
Boccia says mandatory retirement savings would hurt low-income workers, who might need all of their paycheck to cover the expenses of daily life. Many workers who forgo 401(k) plans "probably have a very good reason for doing so," she said.
Ghilarducci, the labor economist, takes the opposite view: She believes every worker should contribute to retirement savings accounts, just as every worker pays into Social Security.
"It’s not a tax," she said. "It’s really saving for your future self."
Biggs, of AEI, says the United States could move toward Australia’s model by capping Social Security benefits, so that the federal program would eventually be "much more focused on lower earners."
The Committee for a Responsible Federal Budget, a Washington think tank, recently proposed capping annual Social Security benefits at $100,000 for couples as a way to shore up the retirement trust fund.
Simultaneously, Biggs said, the U.S. government could require every worker to enroll in a 401(k).
"If everybody is saving for retirement as they should," he said, "Social Security’s job becomes a lot easier."
Could Australia's retirement system replace Social Security?
Tinkering with Social Security might work, other retirement experts say, but replacing it with Australia’s pension system would not.
The Australian "Age Pension" is a far more modest benefit than Social Security. In 2025, annual payments topped out at roughly $28,000 for an individual, according to an analysis by the Center for Retirement Research. It is primarily an anti-poverty program. By contrast, Social Security pays up to $62,172 a year in 2026.
"There’s no easy way to transition from what we have now to an Australian kind of system," said Gopi Shah Goda, director of the Retirement Security Project at the Brookings Institution, in a July interview.
Current workers pay into Social Security with an expectation of receiving the same benefits in retirement that retirees reap today. If the U.S. government replaced Social Security with a smaller, Australian-style pension, Goda said, those workers would feel cheated.
"We’ve already promised benefits to current and former workers that have to be paid somehow in the future," she said. "The details matter a lot here."
This article originally appeared on USA TODAY: Social Security's future is shaky. Trump prefers this country's system
