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0 pointstwoodfin12y ago0 comments

Australia's retirement income system is actually substantially to the right of the U.S. Social Security model, as our politics go. Conservative wonks have long advocated to shift SS to a means-tested basic income benefit plus a mandatory personal account. That's essentially Australia's system. But any attempt to move in this direction has been met with cries from our own "evil socialists" that "privatization" will inevitably enrich the robber barons and force the elderly to eat dog food.

To answer your question: That 2% in an optional 401(k) tax-advantaged private account is above and beyond the 12.4% that goes to Social Security. How much of that 12.4% the employee will ever see depends on his lifespan and the continued benevolence and fiscal prudence of the U.S. Congress.

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3 comments · 2 top-level

vertis12y ago· 1 in thread

I'm not sure that your assertion is correct. Employers are required to pay money into a super fund of your choice (or an employer default if you don't specify).

You can of course contribute privately to this balance as well, and in fact in some cases the government has matched contributions.

Super is not taxed*, though you can't withdraw till you're over 60.

It does have a lot of flexibility as well. It's possible to set up a 'Self Managed Super Fund' which can be used to buy property, or invest in other ways (though this is fairly tightly regulated).

This is of course not connected to the availability of a pension, should that money ever run out. Which makes it all feel pretty far left.

twoodfinOP12y ago

Employer vs. employee mandatory contribution is an accounting gimmick: The money's all coming from the same place, your employer's bank account.

The difference between the U.S. and Australian systems is that you own an account from the mandatory contribution, while an American owns nothing, it's just a tax to fund current and future benefits that are at the whim of current and future governments.

It's often hard to map political positions across nations. Most recently, George W. Bush was a big proponent of moving toward an "ownership society" with a Social Security system that looked more like Australia's and it was our left that fought the idea.

Australia's system is terrific, performing well and should be a model for the U.S.

jcdavis12y ago

And to add to twoddfin's (excellent) response: only half of that 12.4% is paid by the employer, the other half is paid by the employee

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