By Steve Dinnen SYDNEY — There’s been talk for years about reforming Social Security. In December, President Trump floated the idea of adopting an Australian-style retirement system, called superannuation, to supplement or reform the U.S. retirement landscape. Unlike voluntary 401(k) plans, the Australian model features mandatory employer-funded contributions, providing universal coverage and portability of retirement savings. And it seems to be working: Australians have accumulated $4.3 trillion in assets — double the nation’s GDP — in “supers,” as they’re called Down Under. (For reference, IRAs, 401(k)s and similar retirement plans in the United States exceed the GDP by about 22%.) We recently visited Australia and spoke with some people who are connected to this massive wealth-building plan. Chief among them was James Koval (pictured), chief policy and advocacy officer at the Association of Superannuation Funds of Australia. He provided some written commentary that explains how supers work. If you earn a wage in Australia, your employer pays a compulsory contribution, currently 12% on top of your paycheck, into a retirement savings account in your name. (In the United States, employees and employers each put 6.2% of the worker’s pay, or 12.4% total, into Social Security accounts.) That account sits inside a super fund. These are privately run to invest members’ savings on their behalf. So the money doesn’t go to the government, Koval said; it goes to a private institution, but one that operates under strict regulations. Principal Financial Group has operations in Australia that handle such investments, though not with individuals. Koval said the standard investment menu for most funds usually includes conservative, balanced and high-growth options. Many funds also offer specialist choices like ethical or sustainable options. If you don’t make an investment choice, you typically land in a default balanced option that’s designed for the average member’s risk appetite. In this respect, the super behaves like a 401(k) account in the United States. These set-asides cap out annually at $30,000 Australian (about $21,000 USD). On their own, employees can contribute up to $120,000 more per year. Aaron Minney, head of retirement income research at Challenger, an Australian annuities seller, said that with aggressive top-offs some people have accumulated hundreds of millions of dollars in their accounts. That would be a nearly impossible feat in the United States, where the maximum yearly contribution to a 401(k) plan is $72,000. Access is mostly locked up until later in life. As a rule, Australians can begin accessing their super at 60 once they retire or leave a job. After 65, access generally becomes unconditional, even for those who continue working. Minney said people can withdraw the money as a lump sum or use it to buy annuity. Australia does have a Social Security-like product called an Age Pension. It is non-contributory by the worker or employer, and is used for low asset individuals. Funds are drawn from government coffers. As Minney described it, “It’s means-tested and starts at 67, so it’s targeted to the people who need it most.” How the U.S. retirement system stacks up worldwide We all can agree that the United States does not have the world’s best retirement income system. The Mercer CFA Institute Global Pension Index ranks the American system 32nd in a list of 52 countries it tracks. That’s just middle-of-the-road for the world’s biggest economy. The best country in Mercer’s rankings is the Netherlands. Measured across 50 different data points, it earned an A score of 85.4, due to “a robust retirement and income system that delivers good benefits, is sustainable and has a high level of integrity.” Other nations in the A category were Denmark, Iceland, Israel and Singapore. Other high scorers were Ireland, Norway, and Switzerland. Australia earned a B+, and the United States got a C+, along with Colombia, Malaysia and Oman. (Coincidentally, America’s health care system ranked in the middle of the global pack, as well). The Mercer report noted that a number of countries are taking steps to enhance their systems. There was no word on that from the United States. ...read more read less