Robust policy analysis of social security insolvency under demographic aging: A system dynamics study of Iran

• A system dynamics model is developed to assess social security insolvency under aging. • Demographic, labor market, and financial subsystems are endogenously integrated. • Single-instrument policies delay insolvency but exacerbate long-run deficits. • Retirement age reform yields the largest and most robust fiscal improvements. • Mixed policy portfolios outperform isolated reforms under parametric uncertainty. Population aging poses a significant challenge to the financial sustainability of defined-benefit, pay-as-you-go social security systems. Although a wide range of policy instruments has been proposed to address pension fund insolvency, their long-term performance under demographic and economic uncertainty remains inadequately assessed. This study develops a system dynamics model that endogenously integrates demographic evolution, insured population categories, and financial flows to evaluate alternative policy responses to trust fund insolvency. The model is verified and validated using historical data from Iran’s Social Security Organization and simulated over a long-term horizon from 2020 to 2070. Baseline results indicate that, under current policies, the social security trust fund enters persistent deficit conditions in the early 2030s, with cumulative deficits exceeding several times annual contribution revenues by 2050. Scenario analysis shows that fertility-enhancement and employment-expansion policies alone delay insolvency by less than five years and lead to larger long-run deficits due to increased benefit obligations. In contrast, increasing the statutory retirement age by five years improves the system support ratio by more than 30% by 2050 and reduces cumulative deficits by over 40% relative to the baseline. Combining retirement age reform with a moderate contribution rate increase further reduces long-term financial imbalance by more than 60%. Robustness analysis based on a mean–variance criterion confirms that mixed policy portfolios consistently outperform single-instrument strategies across a wide range of demographic and economic uncertainty realizations. The results underscore the importance of integrated, long-horizon policy evaluation frameworks and demonstrate how system dynamics modeling can support robust social security reform design under demographic aging.