Before 1992, the Australian retirement system looked pretty similar to the way people approached retirement in the United States. "Only a few people received good retirement programs — people who worked for companies or the public sector. Large groups of the population had no coverage at all," says Jeremy Duffield, chairman of the Australian Centre for Financial Studies, an academic think tank.
Now, more than 90 percent of employed Australians save money for retirement every year in accounts that are mandated by the government. These accounts represent roughly $1.6 trillion in savings for the Australian economy as of June 2013, according to a report by Deloitte. That's a huge amount of progress over just 22 years — and that's in addition to Australia's pension program, which is similar to Social Security, as well as people's own savings.
The Australian system, with its three-pronged approach, also offers a model for the U.S., especially as the country faces the impending retirement of the baby-boomer generation and the fact that baby boomers, Generation Xers, and millennials are at risk of not accumulating enough cash to sustain their lifestyle as they age.
So how did Australia do it? Well, in 1992 the Australian government created a third leg of retirement savings, called the "Superannuation Guarantee" program. It required employers to contribute 9 percent of an employee's earnings into a retirement account for all workers between the ages of 18 and 70. Employees pick which fund they want the cash invested in, like a mutual fund or a public-sector group. On average, Australians between the ages of 60 and 65 have roughly $170,000 in Australian dollars in these accounts, says professor Susan Thorp, chair of finance and superannuation at the University of Technology in Sydney. The amount of money saved per retiree is only expected to increase as this part of the Australian system matures.