Want to Save Social Security? Adopt the Australian Retirement Model

Social Security is insolvent. No one on either side of the political aisle disputes this, but few try to muster the political will to do anything about it.

Last month, President Donald Trump said his administration is looking “very seriously” at the Australian retirement model. Australia’s program was designed specifically for the type of demographic collapse the United States will experience this century. It is not only popular in the land down under, but wildly successful. Transitioning to this type of mandatory retirement plan would avoid payroll tax hikes, eliminate pressure to flood the U.S. with foreign workers to pay for Social Security, and ensure future Americans’ retirement is guaranteed. It’s also a good policy for a party trying to attract younger voters.

Social Security Will Not Survive the Century

The fatal flaw in the Social Security system was baked in at the start. Most Americans believe the program is essentially a personal bank account that they pay into and pull out of after reaching retirement age. Reality is much more liquid. Social Security remains solvent so long as people working now pay more into the system than is withdrawn from people retiring now. In other words, what individual retirees get out usually isn't equivalent to what they paid in—largely because inflation has devalued threefold the dollars today’s retirees paid. 

As a result, Social Security faces imminent insolvency due to the depleting Old-Age and Survivors Insurance (OASI) Trust Fund. Exacerbating the inflation problem is the shrinking worker-to-beneficiary ratio which has dropped tremendously since Social Security’s inception—meaning there are far fewer workers paying into the system compared to 90 years ago. The Baby Boomers’ retirement is narrowing that gap further at breakneck speed. 

The last year that the OASI Trust Fund collected more than it paid out was 2021. Last year’s Social Security Trustees Report showed the fund is projected to exhaust its reserves by 2033, and by the end of the century, its projected shortfall is $25 trillion. 

For comparison, in fiscal year 2025, the federal government only collected $5.2 trillion in revenue.

If nothing changes, the grandchildren of Americans retiring right now are guaranteed to not receive sufficient Social Security money to survive after retirement. That means we're facing the end of full benefit payments, breaking the program’s promise to future generations—unless action is taken to dramatically reform the system. 

Without those urgent reforms, Social Security won't survive the 21st century.

Voters Demand a Public Retirement Plan

In an ideal world, individuals, families, and communities would take individual and collective responsibility for retirement without government input. But most voters will not support candidates or policies that force people to become responsible enough to fund their own retirement.

Polling bears this out. 

A 2024 Pew Research survey showed 77 percent of Republicans don’t want Social Security benefits reduced in any way—only six points below Democrats. 40 percent of Americans say it should cover even more people with greater benefits, an opinion held by 51 percent of 18 to 29-year-olds.

Transitioning to a privatized Social Security should have begun two decades ago. But the supermajority backing that it enjoys from the public has let Democrats use any suggestion of structural reform to fearmonger for seniors’ votes.

Who could forget the infamous attack ad on former Rep. Mia Love (UT-04) by the liberal Agenda Project Action Fund, featuring former Rep. Paul Ryan dumping a granny off a cliff to the tune of “America the Beautiful”:

In 2004, Ryan introduced a bill to allow those under 55 to voluntarily divert some of their payroll taxes into investment funds. A significant difficulty with this plan is that any diversion of payroll taxes would hasten the trust fund’s depletion, forcing the government to cover the shortfall through taxes or increased deficit spending.

Fiscally conservative Republicans through the years have suggested inching the retirement age upward to limit the burden on the budget. Ryan proposed gradually raising the retirement age, so that it would reach age 70 by 2103. Such proposals make practical sense to wean the retirement system off the public trough but have zero chance of winning politically. Most American voters will not support a system that forces anyone to prolong their working years.

This means when the trust fund runs out in less than a decade, the government will be forced to do one of two things: Increase deficit spending or raise taxes . Either option will ruin the country financially before the next century by plunging it into insurmountable debt, further inflating the dollar.

Leftists propose mass immigration as a solution because of the payroll taxes immigrants and their children pay. This is a terrible idea. 

First, it’s morally wrong to give away the nation’s future to the rest of the world. 

Secondly, young immigrants grow old too. Importing 20 million 20-year-olds will require importing even more by 2060 to pay for their retirement. 

Finally, even with replacement immigration, we still need massive economic growth to counteract inflation to ensure future generations get their full payouts. The post-COVID world, with its coming population crunch and deglobalizing trajectory, is probably not going to see the 5–10 percent annual GDP growth we did at times during the 20th century—the single greatest period of economic expansion in human history. 

So what do we do if we can't tax or immigrate our way out of the problem? It's time to take the conservative approach to preserving America’s entitlement system by tying future retirees’ pensions to investment growth—just like Australia does.

How the Australian Retirement System Works

Australia's superannuation system, colloquially known as "super," ties retirement to the nation’s economic health instead of government expenditure. For instance, our 401(k) works because it rises as the stock market rises. It costs the government nothing, except in minimal regulation oversight. Treating Social Security the same as the 401(k) would save the government trillions of dollars. This would return the government to its proper role as a regulator instead of a bank.

In the Australian system, employers are required to contribute 12 percent of an employee’s wage to employees’ “super” funds, similar to America’s 12.4 percent Social Security payroll tax. Unlike the 401(k), Australians have the option to pick the fund they want their employer to invest in.

The success of the Australian system speaks for itself. Post-inflation investment returns have averaged an annual 4.4 percent, and the funds hold over $2.6 trillion of assets. A full three-quarters of these assets have accumulated through investment growth. This has made it the fourth-largest private pension system in the world, despite Australia ranking only 55th in population.

Investing workers’ retirement benefits in the American economy would similarly not only guarantee future workers have enough to retire on but it would provide them more to retire on than Social Security beneficiaries enjoy today. 

Americanizing the Aussie System

There is a caveat. Making Social Security solvent will not be cheap in the short term. Adopting Australia’s system would require, just as former Rep. Ryan’s plan envisioned, trillions of dollars of transfers from the general budget during a decades-long transition period. 

That’s because the basic structure of the 1930s Social Security system stands: Payroll taxes from today's workers cover the benefits of today's retirees. Diverting the former into investment accounts means depleting the Social Security trust fund faster—meaning the government will have to find additional revenue to cover them. 

Then, once this lengthy transition is complete, there's the issue of handling individuals who didn't earn enough to build a sufficient investment account for retirement. 

Australia solves this with a retirement safety net for individuals 67 and older, paid out of the country’s general budget. Thanks to the “super” funds, the country is relying less and less on this antiquated system, but it will never entirely disappear.  The U.S. government could roll a similar means-tested pension into Social Security Disability Insurance (SSDI).

In fiscal year 2023–24, Australia paid roughly $40 billion in means-tested pensions to 2.6 million people. Adjusting for population, this would be roughly $500 billion in the U.S., one third the cost of Social Security. It’s worth noting that Australia’s superannuation system only began in 1992, so it will take a while before Australian retirees no longer have to rely on a partial pension to supplement their “supers” created after they were already in the workforce.

Here is how America could complete the transition to this system within two decades. 

America should maintain its dual employer-employee payroll contribution at 12.4 percent of an employee’s wage—but move 75 percent of these Social Security payroll taxes into employees’ investment accounts in 10-year increments.

At the start, we could shift 50 percent of the employee’s contribution into his investment account. After 10 years, 50 percent of the employer’s contribution would follow it—then the rest a decade after that. As for the remaining 50 percent from the employee, it could fund the Disability Insurance (DI) Trust Fund, which would cover both disability insurance and a small means-tested pension.

Why? Today, only 1.8 percent of an employee’s wage funds the DI Trust Fund—which is enough to cover disability insurance. In fact, unlike the OASI Trust Fund, the DI Trust Fund is expected to run a surplus over the next 75 years. Increasing this to half the employee’s Social Security contribution, 3.1 percent, would add enough for the DI Trust Fund to also cover a small pension for anyone whose investment account does not suffice. 

As 75 percent of Social Security payroll taxes funnel into employees’ investment accounts, Social Security disbursements would diminish proportionately. Unless the U.S. underwent a second great depression, workers’ investment accounts would always produce more than today’s abysmally low Social Security contribution because they would be tied to the U.S. economy. Australia’s “super” fund success is solid proof of this: It offers retirees more money at a younger retirement age (60).

Social Security as we know it is going away no matter which party controls the government. The trust fund will be depleted before Gen X is done retiring, and there won’t be enough left for anyone in Gen Z to survive on. When Americans say they like Social Security, they’re really saying they like a government-guaranteed retirement system. 

President Trump needs to bully Congress into starting this transition process now. Moving to an investment-based retirement system would increase spending in the short run to cover the diversion of payroll taxes. In the long run, however, it would allow payroll taxes to fully fund America’s retirement system, relieving the federal budget enough to balance it and pay down the debt. Most importantly, transitioning to the Australian model would not only preserve Social Security for future generations but would provide them more than the current system promises. 

(READ MORE: Yes, Republicans Should Support Privatizing Social Security—in 2090)