401(k) vs Super Comparison (for expats)
For US expats in Australia, this tool compares a 401(k) against Superannuation to help you make informed retirement savings decisions.
Quick Use Samples
Your Details
401(k) Details (U.S.)
Superannuation Details (AUS)
Retirement Projection
Projected balances at age 67 (32 years)
401(k)
$1,615,098
Pre-Tax
Superannuation
$1,733,031
Pre-Tax
After-Tax Comparison
401(k)
$1,259,776
Assumes 22% withdrawal tax
Superannuation
$1,733,031
Generally tax-free withdrawal
Annual Contributions
Based on your inputs, over the next 32 years, your estimated after-tax retirement balance would be higher with Superannuation. The projected difference is approximately $473,255. The primary advantage for Superannuation is the tax-free withdrawal in retirement, which significantly boosts the final amount you get to keep. This is a simplified projection and doesn't account for currency fluctuations, differences in investment options, or complex cross-border tax laws. Professional financial advice is highly recommended for expats.
Projected Growth Comparison (After-Tax)
Key Tax Differences
401(k) - U.S. System
- Contributions: Pre-tax, reducing your taxable income now.
- Growth: Tax-deferred. You don't pay tax on earnings each year.
- Withdrawals: Taxed as ordinary income at your future tax rate.
Superannuation - Australian System
- Contributions: Taxed at a low flat rate of 15% on entry (for most people).
- Growth: Taxed at a low flat rate of 15% annually within the fund.
- Withdrawals: Generally tax-free after age 60.
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What is a 401(k) vs Superannuation Comparison?
This calculator is designed for US expats and those familiar with the American retirement system to compare it against Australia's superannuation. It projects the future value of a 401(k) and a superannuation fund to help you understand the key differences in contribution methods, tax treatment, and potential retirement outcomes.
Behind the Formula
The calculator projects the growth of each retirement account based on your inputs. It uses a standard compound interest formula, factoring in your current balance, annual contributions (employee, employer match, and super guarantee), and expected investment returns over your working life. The key difference is in the tax treatment: 401(k) balances are taxed upon withdrawal in retirement, while superannuation is generally tax-free, which significantly impacts the final take-home amount.
Expert Insights
- The biggest philosophical difference is the contribution structure. The 401(k) relies on voluntary employee contributions incentivised by an employer match, while superannuation is built on a compulsory employer contribution (Superannuation Guarantee) for all employees.
- Tax treatment is a major factor. Superannuation contributions are taxed at a low flat rate of 15% on the way in, but withdrawals are tax-free in retirement. A traditional 401(k) is tax-deferred (no tax on contributions), but you pay your marginal income tax on withdrawals.
- For US citizens living in Australia, there can be complex cross-border tax implications. It's highly recommended to seek advice from a tax professional specializing in US-Australia tax treaties to understand reporting requirements and avoid double taxation.
Actionable Tips
- If your US employer offers a 401(k) match, it's often wise to contribute at least enough to get the full match, as this is essentially 'free money'.
- In Australia, even if you are not a citizen, if you are working for an Australian employer, they are required to pay the Superannuation Guarantee for you. This is a powerful, automatic boost to your retirement savings.
- Consider the long-term plan. If you plan to retire in Australia, the tax-free withdrawals from superannuation can be a significant advantage. If you plan to return to the US, the portability and familiarity of a 401(k) might be more appealing.
Real-World Examples
A young tech worker on a visa in Australia
A 30-year-old American is working for an Australian tech company. The calculator helps them see how the compulsory 11% super contribution builds a solid retirement base automatically, compared to the voluntary nature of their previous 401(k).
An executive with a global company
An executive is deciding between a role in the US office with a 401(k) plan or the Sydney office with superannuation. The calculator shows that while the 401(k) might have a higher contribution limit, the tax-free withdrawals from super could result in a higher net retirement income if they stay in Australia.
Comparing contribution strategies
Someone uses the calculator to see the impact of voluntary contributions. They find that making an extra 5% voluntary contribution to their super has a similar effect on their final balance as contributing 5% to a 401(k) with a 5% employer match, but with different tax outcomes.
Glossary of Terms
401(k)
A retirement savings plan sponsored by an employer in the United States. It lets workers save and invest a piece of their paycheck before taxes are taken out.
Superannuation (Super)
Australia's retirement savings system. It's a compulsory program where employers contribute a percentage of an employee's salary into a super fund.
Employer Match
A common feature of 401(k) plans where an employer contributes a certain amount to an employee's retirement account based on the amount of the employee's own annual contribution.
Superannuation Guarantee (SG)
The compulsory contribution made by employers to their employees' superannuation funds in Australia, currently legislated at 11%.