Could Looking to Australia’s "Super" System Help the U.S. Fix Social Security?
"Ute" (SUV), "chips" (French fries), "sunnies" (sunglasses), and "mates" (friends) are just a few of the slang terms I picked up earlier this year when the Keens visited our family in Brisbane, Australia.
Another was "super," which is short for "superannuation." This mandatory savings program is central to Australia's retirement planning. And recently, President Trump floated the idea of implementing a similar program here in the U.S.
On today's show, we discuss if taking some inspiration from our friends Down Under could provide a "super" solution to Social Security's looming insolvency and help more Americans build their nest eggs for retirement.
What's "Super" About Australia's Retirement System?
Broadly speaking, Australia's retirement system revolves around two programs.
The Age Pension is Australia's government welfare program for seniors. Unlike Social Security in the U.S., Australians don't have to make contributions via a dedicated tax to qualify. The Age Pension is also means-tested for both income and assets, meaning wealthy retirees may have reduced benefits or not receive a pension at all.
Superannuation is a mandatory retirement savings account system. Australian employers are legally required to contribute 12% of an employee's earnings into a portable, private retirement account held in the worker's name. At age 60, Australian retirees can usually access their "supers" with some early withdrawal penalties. At 65, they take full control of their accounts. Contributions are generally taxed, but distributions taken after age 60 are generally tax-free.
Solving the Social Security "Problem."
So, why are some of our leaders in Washington interested in Australia's retirement system?
Private retirement savings or Social Security accounts have been proposed here before, most prominently by President George W. Bush. Australia could be a model for how such a system could work. While 401(k) plans and IRAs have helped millions of Americans build wealth and prepare for retirement, participation in privately held and employer-match accounts is uneven across the workforce, especially for small businesses, hourly employees, and self-employed entrepreneurs. A mandatory retirement savings program could help to close this gap and give more workers the nudge they need to plan ahead for their Golden Years.
Of course, any discussion about changing retirement planning in the U.S. eventually leads to the big question that we receive all the time at Keen Wealth, both from the folks we meet at our offices and our listeners and viewers:
Is Social Security going to run out of money? Should I claim my benefits as soon as I can?
It's true that, on paper, the Social Security Trust fund will be depleted in 2032. Creating a parallel, privatized system where (presumably wealthier) folks could have more control over what they're contributing and what their benefits are could potentially ease the insolvency problem.
But the Social Security doomsayers always assume that a future Congress and President will just let the trust fund go bankrupt. That seems highly unlikely. Our leaders may wait until 2032 to find the right mix of taxes, cost-of-living adjustments, benefit rates, and retirement age to keep Social Security going. But doing nothing would be an economic disaster, not to mention a political disaster for whoever happens to be in charge.
Your Social Security Decision Partner
Unfortunately, there are already too many "disaster" headlines and retirement doomsayers in all of our media feeds.
And too many seniors are responding to those headlines by making emotional money moves that they may never recover from.
There are legitimate reasons to consider taking Social Security as soon as possible. Some seniors need those funds to meet an early retirement goal. Others might be dealing with chronic or even terminal health conditions that could prevent them from reaching full retirement age. It's also common for retired couples to take their Social Security benefits at different times to coordinate survivor's benefits and lifetime tax liability.
But if fear about Social Security's solvency is clouding your judgment, you could be letting overblown headlines talk you into a permanent reduction in benefits you've worked decades to secure.
As my family in Australia might say, "Crikey!"
Don’t let cable news and social media influence your Social Security decisions. Come visit Keen Wealth and we can stress-test your plan for a wide variety of scenarios so that you’re making informed choices for your retirement goals.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information, please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.
The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.
The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019 and the second edition under Financial Risk Management on October 26, 2022. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities.
The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.
For additional details on Keen Wealth Advisors, please visit https://www.keenwealthadvisors.com/important-disclosures.
20260729-5792427-18482640