Loading …Trump Wants Your Employer To Put 12% Of Your Pay In Retirement – Whether You Like It Or Not
President Trump said Tuesday his administration is “looking very seriously” at adopting an Australian-style retirement system for America. “It’s a good plan. It’s worked out very well,” he told reporters at the White House.
The Australian model – called “superannuation” – requires employers to contribute 12% of every worker’s pay into locked retirement accounts. There’s no opt-out. If you’re employed, 12% of your earnings goes into investment funds you can’t touch until retirement.
That’s fundamentally different from America’s voluntary 401(k) system where employers decide whether to offer retirement plans and whether to match contributions. It’s also different from Social Security, which pools current workers’ taxes to pay current retirees.
The question isn’t whether Australia’s system works – it does, ranking B+ globally while America gets C+. The question is whether Americans would accept mandatory retirement contributions that reduce take-home pay while locking money away for decades.
Discussion
We need another Civil War @ the Ballot BOX >> Vote to separate the Blue and Red voters by STATE. Then for 2 different Nations . Then one of them may survive>>>
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How Superannuation Actually Works
Australian employers must contribute 12% of employee pay to “super funds” – professionally managed investment accounts regulated by government. This is on top of regular wages, not deducted from them, though economists note that mandatory employer contributions ultimately come from compensation that would otherwise go to wages.
Employees choose among different super funds invested across stocks, bonds, private equity, and other assets globally. The money is locked until retirement age with very limited exceptions for early access.
The system started in 1992 at 3% and gradually increased to today’s 12%. Australia’s 27 million people have accumulated roughly $3 trillion in super funds – the world’s fourth-largest retirement savings pool despite being the 55th largest country by population.
“There is no opt out,” Tim Jenkins of consulting firm Mercer explained. “If you are employed, your employer must pay 12% of your pay to your retirement savings, and it’s locked up until you’re approaching retirement age.”
That mandatory, locked-away structure is what makes it effective – and what would make it controversial in America.
Why Australia Built This System
Australia faced the same demographic problem America faces: aging population, declining birth rates, mounting pressure on government pension programs. Superannuation shifts retirement funding from government to individual savings.
“With an aging population and declining birth rates, a system like this takes the fiscal burden off future generations,” Jenkins noted. Future workers won’t need to pay massive taxes supporting retirees because current workers are building their own retirement funds.
There’s still a government pension as safety net for those needing additional support. But superannuation has become the primary retirement vehicle, reducing reliance on government programs.
This addresses America’s Social Security crisis directly. Social Security won’t be able to pay full benefits by 2034 without Congressional action. The trust fund is depleting as more retirees draw benefits while fewer workers pay in.
Mandatory individual retirement accounts like Australia’s would reduce future Social Security dependence – if Americans accept the trade-offs.
The American System That Would Get Replaced
America’s retirement structure combines three elements: voluntary employer 401(k)s established in 1978, Social Security from 1935, and individual savings.
Employers decide whether to offer 401(k)s and whether to match contributions. Many don’t offer plans at all. Many who do offer minimal or no matching. Employees must opt in and choose contribution amounts.
Social Security is mandatory – workers pay 6.2% of earnings, employers match 6.2%. But that money doesn’t build individual accounts. It funds current retirees’ benefits. When you retire, future workers’ taxes fund your benefits.
This system has worked for decades but faces mounting problems. Social Security’s trust fund depletes in nine years. Many Americans reach retirement with inadequate 401(k) savings because they didn’t contribute enough or their employers didn’t offer plans. The voluntary nature leaves millions unprepared.
Australia’s mandatory system eliminates the voluntary problem – everyone saves because contribution isn’t optional.
The Take-Home Pay Problem Nobody’s Discussing
Superannuation contributions are “on top of” wages technically, but economics doesn’t work that way. When employers must contribute 12% to retirement funds, that 12% comes from compensation budgets that would otherwise go to higher wages.
Australian workers don’t see 12% deducted from paychecks. But they also don’t receive the higher wages they’d get if employers weren’t required to make retirement contributions. The trade-off is forced savings versus higher current income.
For American workers living paycheck to paycheck, that trade-off is brutal. Implementing 12% mandatory contributions would either reduce take-home pay directly or suppress wage growth as employers redirect compensation to retirement accounts.
A worker earning $50,000 would see $6,000 annually redirected to retirement instead of current income. That’s $500 monthly they can’t use for rent, groceries, or emergencies. The money builds retirement security – but doesn’t help pay this month’s bills.
Australia phased this in gradually over decades, starting at 3%. Even so, the system works partly because Australian wages adjusted over time. Implementing it quickly in America would create immediate financial stress for millions of households.
The Politics That Make This Nearly Impossible
Changing America’s retirement system requires Congressional action. That means Republicans and Democrats agreeing on mandatory employer contributions, locked accounts, and reduced worker flexibility.
Conservative opposition would frame this as government mandating how private employers spend their money and forcing workers into investment accounts they can’t access. The “freedom to choose” argument writes itself.
Progressive opposition would note this does nothing for workers whose employers don’t provide adequate base wages. Forcing retirement savings while people can’t afford housing or healthcare addresses the wrong problem.
Both parties would face voters angry about reduced take-home pay. Even if the economics work long-term, the politics of making people’s paychecks smaller in exchange for retirement accounts they can’t touch for decades is toxic.
Australia implemented this in 1992 when the country was smaller, more politically cohesive, and had different economic conditions. Doing it in polarized America with 343 million people is exponentially harder.
Social Security’s Uncertain Future
The appeal of Australia’s system is that it addresses Social Security’s insolvency without cutting benefits to current retirees. Build individual accounts for current workers so they don’t need Social Security – or need less of it – decades from now.
But that creates transition problems. Current retirees depend on current workers’ Social Security taxes. If you redirect 12% of worker compensation to individual accounts, where does Social Security funding come from during the transition?
Australia phased superannuation in alongside existing pension systems. America would need similar transition lasting decades – during which we’d be funding both current retirees’ Social Security and current workers’ individual accounts.
The math might work eventually. But the transition costs would be enormous, requiring either higher taxes, benefit cuts, or deficit spending to bridge the gap.
Whether Americans accept that transition pain for long-term retirement security is the political question Trump hasn’t addressed.
What Treasury Secretary Bessent Already Knows
Scott Bessent spoke at a superannuation summit in Washington in February, praising the system’s “automatic super payments, near universal coverage and preservation of savings until retirement.”
Australian super funds are major investors in U.S. assets – that $3 trillion pool seeks returns globally. Treasury Secretary interest in superannuation isn’t just about retirement policy. It’s about attracting that investment capital.
If America adopted similar mandatory savings, it would create trillions in new investment capital needing deployment. That capital would flow into stocks, bonds, infrastructure, private equity – boosting asset prices and providing funding for American businesses.
The financial industry would love mandatory retirement accounts – guaranteed flow of investment dollars from every employed American. Whether that’s reason to adopt the system or reason to be skeptical depends on whether you trust market returns to provide adequate retirement income.
Australia’s system has worked partly because global markets delivered strong returns over past decades. Whether that continues is unknowable. Mandatory accounts that perform poorly don’t provide retirement security – they just lock up money people needed for current expenses.
The Choice America Hasn’t Made
Trump saying he’s looking “very seriously” at Australia’s system doesn’t mean it will happen. It means Treasury is studying whether mandatory employer retirement contributions could address America’s retirement crisis and Social Security insolvency.
The policy question is whether forced savings building individual wealth works better than Social Security pooling risk across generations. The political question is whether Americans accept mandatory contributions reducing take-home pay in exchange for locked retirement accounts.
Australia answered yes to both – gradually, over decades, in a smaller, less politically polarized country. Whether America reaches the same conclusion is uncertain.
What’s clear is that America’s current system isn’t working for millions approaching retirement with inadequate savings and Social Security facing insolvency. Something needs to change.
Whether that change is adopting Australia’s mandatory employer contributions, reforming Social Security, increasing 401(k) incentives, or some combination depends on politics America hasn’t yet resolved.
Trump’s interest in the Australian model at least acknowledges the problem exists and other countries have found solutions. Whether those solutions work in American political and economic context is the question nobody can answer yet.
But “looking very seriously” at mandatory 12% employer retirement contributions is quite different from convincing Congress and voters to accept permanently reduced take-home pay for retirement security decades away.
This is still the USA and the government, as twisted and crooked as it is, has right to make any part of my pay go anywhere against my will. It is proven they can’t keep their word from one term to another and none the the low life politicians can spend anyone else’s money responsibly. Then when you need to withdraw it they want to tax it beyond reason after it sets thru inflation and looses a large percentage of its buying power .