> A Different Perspective: From Down Under...  - Per Stirling




A Different Perspective: From Down Under… 

I’ve just returned from another trip to Australia, swapping stories and experiences with my mother-in-law, who lives in the land of kangaroos, Vegemite and some absolutely amazing coffee.  Perhaps unconventionally our conversations typically turn towards financial topics, and on this latest trip, we broached the differences between how Aussies handle their retirement savings compared to that of the US.  That’s right, the Superannuation fund versus its American cousin, the 401(k).  Without going into too much detail I thought I’d touch on a couple key differences that stood out to me.

Mandatory Contributions:

In Australia the Superannuation funds are known for their mandatory contributions, where employers must set aside a minimum of 11% of an employee’s salary into their Super account.  (The rate is scheduled to increase to 12% by July 2025) This mandatory contribution is in addition to an employee’s base salary or wages.  Yes, the employers are required to contribute 11% of an employee’s salary to their Superannuation fund that is typically not deducted from the employee’s take-home pay. Therefore, employees in Australia receive a total compensation package that includes both salary and Superannuation contributions.

Compare that to the 401(k) in the US, where contributions are voluntary, though employers often offer matching contributions up to a certain percentage.  But keep in mind that these contributions are often voluntary and may vary depending on the employer. While some US employers may offer generous retirement benefits, others may offer fewer benefits or none at all.


Another point I found interesting is when it comes to taxes, both systems have their quirks. In Australia, contributions to Super are taxed at a flat rate of 15%, whereas in the US, contributions to a traditional 401(k) are tax-deferred until withdrawal, potentially lowering your taxable income in the present. However, withdrawals from both Super and 401(k) are taxed upon distribution, with some exceptions and rules varying by country.

So, which system reigns supreme? Well, it ultimately depends on your individual preferences, financial goals, and where you plan to spend your golden years. Whether you’re in Melbourne sipping some of the best coffee in the world or traveling the backroads in the Texas Hill Country, both the Superannuation and the 401(k) offer valuable tools for securing your financial future.


Written by: Steve Cartwright, CFP®