What this means is that each worker does not have an assigned pool of assets securing his or her retirement. Rather, the monthly benefits paid out by social security come from the taxes being paid in current workers. To this end, social security is an intergenerational transfer or money from younger working people to older retired people. In other words, if no one were working, there would be no social security benefits. To this end, social security is a Ponzi scheme in that the earlier retirees get the greatest benefits, while later participants might not receive benefits in proportion to their paid taxes into the system.
Demographics supply the compelling facts governing social security payments and taxes.
As we transition from a society with many workers and few retirees to one with many retirees and few workers, the relationship between the taxes and the benefits goes askew. Indeed, at current rates, social security will go bankrupt before the middle of this century if current demographic trends are played out and tax rates are not increased or benefits are not reduced. Social Security is the so-called third rail of politics, the one with the electricity in it. If you are a politician and you recommend changes in the system, you're likely to get burned. People believe, wrongly, that social security is an entitlement and that we have a right to receive benefits.