Working longer could avert disaster
Japan has one of the highest old-age dependency ratios but not one of the highest retirement income replacement ratios. That could spell trouble for its citizens, now and in the future.
Japan has a pay-as-you-go pension system, similar to many other countries around the globe, including the United States. Fertility rates and life expectancy are also key factors to consider when projecting the future sustainability of the program, but the fertility rate in Japan has dropped since the 1970s, while life expectancy has grown during the same time, according to the World Bank.
The country has slowly been integrating its own version of a voluntary individual retirement plan, following the path of the United States. The country passed legislation to increase funding requirements and introduce defined-contribution plans beginning in 2001, in an attempt to bolster retirement and economic security, according to a report published in the U.S. National Library of Medicine.
The ratio assumes productivity drops after the mid-60s, and that older populations need to retire — but that’s not true, Irving said, and such an assumption can be dangerous to society. Prolonging a career and remaining in the workforce is not only healthy for many people, but it could deter a pension system from faltering because of the influx of older people claiming benefits.
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