With the future of America's Social Security trust fund looking increasingly unstable, President Donald Trump has indicated that his administration is taking a close look at Australia's retirement model. Economists have long praised the Australian system, which mandates that workers participate in a savings program similar to a 401(k). Trump has publicly stated that his administration is examining this setup "very seriously" as a potential solution to the retirement challenges facing the United States.
The discussion comes at a critical time for American retirees and workers. The United States retirement system is widely criticized by experts, and its main pillar is currently in crisis. Social Security, the national retirement trust fund, is projected to face potential insolvency by 2032. Compounding the issue is the fact that only about half of all private-sector workers in the U.S. currently participate in workplace retirement plans meant to supplement Social Security. This structural weakness was reflected in the 2025 Mercer CFA Institute Global Pension Index, which graded the United States retirement system with a C+, while awarding Australia a B+.
Australia's system relies on a fundamentally different framework. In Australia, employers are legally required to contribute 12% of their employees' wages into individual, 401(k)-style retirement accounts. To support those who do not accumulate enough assets or income during their working years, a national safety-net pension provides supplementary income. Andrew Biggs, a senior fellow at the libertarian American Enterprise Institute, noted in a July interview that the model is highly logical. "If you were inventing a retirement system from scratch today, you would almost certainly do something like the Australian retirement system," Biggs said.
Advocates point out that Australia's approach protects retirees from falling into poverty while simultaneously forcing workers to save. Furthermore, it operates with greater fiscal efficiency. Andrew Eschtruth, the director of the Center for Retirement Research at Boston College, explained in a July interview that Australia "still ends up spending considerably less of their GDP on their program than we do." In contrast, the American system allows millions of workers to save nothing at all for their retirement, while Social Security attempts to prevent poverty at a cost that has become unsustainable.
Currently, the financial flow of Social Security is severely unbalanced, with more money leaving the system than coming in. As the program's once-substantial cash reserves continue to dwindle, the consequences of inaction are stark. According to estimates from AARP, if the federal government does not intervene before the reserves are fully depleted, the Social Security Administration will only have enough funds to pay roughly 83% of promised full benefits.
President Trump has repeatedly expressed admiration for the Australian approach. During a White House event on July 6 to launch "Trump Accounts"—a federal savings initiative designed for children—Trump praised the Australian system. "It’s really worked out very well, incredibly well and very respected," Trump remarked. "And we’re going to be talking about that with Congress and see if we can implement it." While Trump has not yet detailed a specific plan for how the U.S. might adopt the model, some clues can be found in his administration's executive actions. His push aligns chronologically with the upcoming launch of the Saver's Match, a 2022 Biden administration initiative designed to provide up to $1,000 annually in matching retirement contributions for low-income workers.
Teresa Ghilarducci, a labor economist at The New School for Social Research, observed in a July interview that "the president wants to help everybody in the United States get a retirement account, like every Australian worker has a retirement account." However, experts point out that encouraging accounts is very different from Australia's mandate. The idea of forcing American workers to save has divided retirement policy analysts. Romina Boccia, the director of budget and entitlement policy at the libertarian Cato Institute, argued in a July interview that the term "employer contribution" is somewhat misleading. "Ultimately, it comes out of workers' wages," Boccia said, warning that mandatory savings could harm low-income families who require their entire paychecks to cover daily living expenses. She noted that many workers who opt out of 401(k) plans "probably have a very good reason for doing so."
Conversely, Ghilarducci strongly supports mandatory retirement savings, comparing it to the way all workers are required to pay into Social Security. "It’s not a tax," Ghilarducci argued. "It’s really saving for your future self." To bridge the two systems, Biggs suggested that the U.S. could transition toward the Australian model by capping Social Security benefits so that the program is "much more focused on lower earners." This concept aligns with a recent proposal by the Committee for a Responsible Federal Budget, a Washington-based think tank, which suggested capping annual Social Security benefits at $100,000 for couples to help shore up the trust fund. Alongside such a cap, Biggs proposed that the government could require all workers to enroll in a 401(k). "If everybody is saving for retirement as they should, Social Security’s job becomes a lot easier," Biggs said.
However, other experts warn that replacing Social Security with an Australian-style system is highly impractical. Australia’s "Age Pension" is a much more modest anti-poverty benefit compared to Social Security. In 2025, the maximum annual payment for an individual under the Australian pension was about $28,000, according to the Center for Retirement Research. In contrast, U.S. Social Security benefits can pay up to $62,172 annually in 2026. Gopi Shah Goda, the director of the Retirement Security Project at the Brookings Institution, emphasized the immense difficulty of such a transition in a July interview. "There’s no easy way to transition from what we have now to an Australian kind of system," Goda said, pointing out that current and former workers have paid into the system with specific expectations. "We’ve already promised benefits to current and former workers that have to be paid somehow in the future," she added. "The details matter a lot here."
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