The Effects of Aging, Prolonged Life Expectancy and Retirement on the American and Japanese Social Security Systems

The Social Security Systems in the United States and Japan face issues due to demographic changes. This paper focuses on and discusses how retirement pensions are determined in each country and issues due to prolonged life expectancy and trends toward early retirement. In the US a plan that accounts for the deficit caused by these demographic changes and then increases the payroll tax and decreases benefits accordingly would put it back onto a sustainable path. While in Japan, continuing with the initial goals of the 2004 pension reform, decreasing the replacement rate by 20 percent and increasing the normal retirement age would also help to alleviate Social Security's uncertain future.