Years ago in the late 60s there appeared in one of the news magazines an article suggesting that the government give every child born in the USA $300.00. This amount was to be placed in an interest bearing account belonging to the child and left untouched until retirement. Someone do the math as to what that would yield over the past 65 years.
That of course never happened. But the Australians did something similar without any government gift and they have a retirement system that actually works.
We could learn something if we wished. But we don’t and we won’t.
Jon Smith 04/05/2017
What the U.S. Can Learn from Australia’s ‘Super’ Retirement System
Americans could stand to save a lot more money than they do now.
From National Review: By STEPHEN SCHMALHOFER, April 5, 2017
In 1697, black swans were first discovered in Western Australia. In 1983, Australians discovered a golden goose. This is the true story of the Eighth Wonder of the World: Australian Superannuation. In a new political history, Keating’s and Kelty’s Super Legacy: The Birth and Relentless Threats to the Australian System of Superannuation, former MP Mary Easson demonstrates an insider’s eyes and ears for the backroom brawls fought by big personalities over a big idea made real: retirement savings and investment for all workers, funded by mandatory employer contributions.
In America, limited 401k options are available to mostly white collar professionals. In Australia, retail, construction, and office workers alike enjoy the highest per capita investment in managed funds with access to university endowment-style asset allocation, including Australian and international public equities, fixed income, real estate, infrastructure, hedge funds, private equity, and cash. While the average U.S. savings rate is a meager 5.7 percent, Australians automatically save 9.5 percent in their superannuation accounts, a number set to increase to 12 percent by 2025. Employees can add their own contributions (tax-advantaged for employee and employer) to maximize their savings. Their accounts are fully portable, following modern workers as they change jobs or drop in and out of the workforce to care for children or elderly parents. Upon retirement, the lump sum in each account can be converted into an annuity for long-lasting retirement income, eliminating the risk of outliving one’s savings.
This system of compulsory superannuation is the beating heart of Australia’s world-leading approach to retirement income, supplemented with a limited government pension and individual savings.
What binds Americans in 2017 and beyond? Are we only united against scapegoats and trumped up enemies, or can we create new opportunities for solidarity and prosperity? In November, voters sent a clear message: We want to work and save to provide for our families, our communities, and our country. With the Republican party in its strongest position since the Roaring Twenties, GOP leaders should learn from the failure of President George W. Bush’s ambitiously articulated but ultimately abandoned “Ownership Society.” Bush’s proposal to create individual accounts for Social Security failed to gain support, and a precious opportunity for new multi-generational wealth creation was instead squandered, as Americans threw their money away on teaser-rate mortgages and home-equity loans. While we ate our seed corn, Australians gathered billions of dollars in annual contributions. With over $2.2 trillion currently invested, Australian unions, employers, and politicians have created a prosperous “Shareholder Society.”
The GOP is paralyzed by tone-deaf discussions of “entitlement reform” while anxious Americans worry more about the balance of their savings account than balancing the national budget. Across the aisle, Massachusetts senator Elizabeth Warren demands higher capital requirements for banks, but ignores the opportunity to capitalize Social Security as an endowment for future generations. Now we risk the degradation of Social Security into a means-tested welfare scheme, unused and neglected by the affluent, abandoned to the poor. But in the “national savings nation” at the end of the world, both white-collar professionals and blue-collar workers enjoy access to the power of compounding returns on capital. While our scheme forces retiring Baby Boomers into actuarial battle against their progeny, Australian superannuation is a Burkean “contract between the past, the present, and those yet unborn.” By deferring compensation (and consumption), Australian workers accumulate assets that weave more resiliency into the social safety net, rather than piling up unfunded liabilities which threaten to tear it down in the times of demographic or economic stress when they are needed most.