Social Security is a pay-as-you-go system.Payroll taxes earned by current workers are distributed to pay benefits for those who are already retired.

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Social Security operates as a pay-as-you-go system, where the payroll taxes collected from current workers are used to pay benefits to retired workers. This is why there is a concern about the system's sustainability as the population of retirees grows and the number of workers contributing to the system shrinks.

Social Security Is a Pay-As-You-Go System