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I'm a US Citizen living in Australia. I find the mandatory superannuation very refreshing and surprised the US doesn't implement something. I feel if everyone

by kayman 11y ago

I'm a US Citizen living in Australia. I find the mandatory superannuation very refreshing and surprised the US doesn't implement something. I feel if everyone saves 10% of their income for the rest of their working life, it leaves you with something around retirement. The closest in the US is the company you work for can match upto 4%. So financial advice in USA is put away maximum into 401k/Superannuation that your company will match because if not, you are losing that free money. As a current renter, the mandatory superannuation law allows me to make a rational choice to rent when it suits me. Renting allows me the flexibility and freedom to go where the work is. At least have the option to go where the work is. If I owned a home, I wouldn't feel as free. I plan on buying when it makes sense, but right now, I do not see any benefit of tying up most of my wealth into home ownership. I look at renting as a utility of life. I need to live somewhere and it costs me x dollars. In retirement, I plan to have x dollars in retirement money to pay for my rent then too. On the other hand, I'm in IT. I don't ever plan to retire. Because when I retire, I'll be doing the same thing...coding at home. Might as well get paid for it. :)

gambiting 11y ago
>> I don't ever plan to retire. Because when I retire, I'll be doing the same thing...coding at home. Might as well get paid for it. :) You can still retire and get a pension,and still make money by coding.
netcan 11y ago
The best thing about it is that it is an account that the saver has actual visibility on. It encourages retirement savings. It's a good base for employer and/or government contribution match schemes. It has obvious and fair inheritance implications (if you die at 64, who gets your pension?). It's far safer, with much less risk that the money will be gone when you retire. The systemic risk aspect is much better too. The alternative is pension schemes, alarmingly similar to pyramid schemes. The company (or however it is centralized) pays out of current income, IE current employees or tax payers pay for old pension obligations. This works until it doesn't. If people start living longer, the company/tax base shrinks or no one bothered to do the sums 30 years ago, it collapses. The reason pension schemes are so common is because it's easier to start a pension scheme and very hard to move from the pension scheme to a superannuation scheme. When you start a pension shceme, the costs are very low at first while the number of retirees is low. You can pay out pensioners starting now. Superannuation only hits full speed once people have contributed to it for a lifetime start to retire. Way way longer then the horizon of CEOs, politicians or union bosses. If you try to move from pensions to superannuations, you are in a problem. Your current crop of workers need to pay for their parents/grandparent generation of pensioners while saving for their own retirement as well. Australia is lucky to have the system it does.
- kijin 11y ago
  Most existing pension plans were designed when interest rates and birth rates were both much higher than they are now. So they made more sense back then. Even a Ponzi scheme can be sustainable given high interest rates and a steady stream of new customers!
extra88 11y ago
> The closest in the US is the company you work for can match up to 4%. Is there actual regulation that limits how much a company can match? This [1] refers to 6% as a common practice, not a limit imposed on employers. At two universities where I've worked, the university's contribution to a 403b (401k for non-profits) didn't require any contribution by the employee. At one the university's contribution was 6.25%, at the other it was 5% for employees under 40 and 10% for those 40 and older. [1] https://en.wikipedia.org/wiki/Employer_Matching_Program https://en.wikipedia.org/wiki/Employer_Matching_Program
- chrshawkes 11y ago
  this is bogus, the company I work for has put 10% into my 401k for 10 years now. I'm effectively saving 15% of my income every year.
- kayman 11y ago
  There is no regulation. Different companies contribute different amounts, all part of their benefits package. Ex: Company A might pay a high salary but low match. Company B might pay a lower salary but contribute x% to 401k.
- phonon 11y ago
  Most companies only want to do a safe harbor match (roughly 3%-6%, depending on how it's set up) on their 401(k) plans...otherwise the auditing (annual testing requirements) requirements are a real pain. http://www.guidestoneretirement.org/ToolsandEducation/safeharbor.aspx http://www.guidestoneretirement.org/ToolsandEducation/safeha...
phonon 11y ago
> surprised the US doesn't implement something. It was tried over 10 years ago...it bombed politically. http://money.cnn.com/2003/02/03/retirement/bushplan/ http://money.cnn.com/2003/02/03/retirement/bushplan/

by kayman 11y ago

gambiting 11y ago

>> I don't ever plan to retire. Because when I retire, I'll be doing the same thing...coding at home. Might as well get paid for it. :) You can still retire and get a pension,and still make money by coding.

netcan 11y ago

The best thing about it is that it is an account that the saver has actual visibility on. It encourages retirement savings. It's a good base for employer and/or government contribution match schemes. It has obvious and fair inheritance implications (if you die at 64, who gets your pension?). It's far safer, with much less risk that the money will be gone when you retire. The systemic risk aspect is much better too. The alternative is pension schemes, alarmingly similar to pyramid schemes. The company (or however it is centralized) pays out of current income, IE current employees or tax payers pay for old pension obligations. This works until it doesn't. If people start living longer, the company/tax base shrinks or no one bothered to do the sums 30 years ago, it collapses. The reason pension schemes are so common is because it's easier to start a pension scheme and very hard to move from the pension scheme to a superannuation scheme. When you start a pension shceme, the costs are very low at first while the number of retirees is low. You can pay out pensioners starting now. Superannuation only hits full speed once people have contributed to it for a lifetime start to retire. Way way longer then the horizon of CEOs, politicians or union bosses. If you try to move from pensions to superannuations, you are in a problem. Your current crop of workers need to pay for their parents/grandparent generation of pensioners while saving for their own retirement as well. Australia is lucky to have the system it does.

kijin 11y ago
Most existing pension plans were designed when interest rates and birth rates were both much higher than they are now. So they made more sense back then. Even a Ponzi scheme can be sustainable given high interest rates and a steady stream of new customers!

extra88 11y ago

> The closest in the US is the company you work for can match up to 4%. Is there actual regulation that limits how much a company can match? This [1] refers to 6% as a common practice, not a limit imposed on employers. At two universities where I've worked, the university's contribution to a 403b (401k for non-profits) didn't require any contribution by the employee. At one the university's contribution was 6.25%, at the other it was 5% for employees under 40 and 10% for those 40 and older. [1] https://en.wikipedia.org/wiki/Employer_Matching_Program https://en.wikipedia.org/wiki/Employer_Matching_Program

chrshawkes 11y ago
this is bogus, the company I work for has put 10% into my 401k for 10 years now. I'm effectively saving 15% of my income every year.
kayman 11y ago
There is no regulation. Different companies contribute different amounts, all part of their benefits package. Ex: Company A might pay a high salary but low match. Company B might pay a lower salary but contribute x% to 401k.
phonon 11y ago
Most companies only want to do a safe harbor match (roughly 3%-6%, depending on how it's set up) on their 401(k) plans...otherwise the auditing (annual testing requirements) requirements are a real pain. http://www.guidestoneretirement.org/ToolsandEducation/safeharbor.aspx http://www.guidestoneretirement.org/ToolsandEducation/safeha...

phonon 11y ago

> surprised the US doesn't implement something. It was tried over 10 years ago...it bombed politically. http://money.cnn.com/2003/02/03/retirement/bushplan/ http://money.cnn.com/2003/02/03/retirement/bushplan/