The future of Social Security is uncertain, and President Trump is looking to Australia's retirement system for inspiration. With Social Security facing potential insolvency by 2032, the country's retirement system is in crisis. Only half of private-sector workers participate in workplace retirement plans, which are meant to supplement Social Security. Australia's retirement system, on the other hand, is superior because it protects retirees from poverty while requiring workers to save for retirement. Employers are required to pay 12% of worker wages into 401(k)-style accounts, and a national pension provides extra income to retirees who don't have enough income and assets to get by. Australia's retirement system is ranked higher than the United States' in the Mercer CFA Institute Global Pension Index. Andrew Biggs, a senior fellow at the libertarian American Enterprise Institute, says that if you were inventing a retirement system from scratch today, you would almost certainly do something like the Australian retirement system. However, replacing Social Security with Australia's pension system would not be easy. The Australian Age Pension is a far more modest benefit than Social Security, and current workers pay into Social Security with an expectation of receiving the same benefits in retirement. Tinkering with Social Security might work, but replacing it with Australia's pension system would not. Trump's executive order to broaden access to retirement savings for workers whose employers don't offer 401(k)-type plans is a step in the right direction, but it's not enough. Mandatory retirement savings would hurt low-income workers, who might need all of their paycheck to cover the expenses of daily life. Experts are divided on whether forced retirement saving would work in America. Some believe it would help, while others argue that it would be unfair to current workers. The key to a sustainable retirement system is finding a balance between protecting retirees from poverty and requiring workers to save for retirement.
