The money that is withheld from your paycheck for Social Security is redistributed as cash transfers to elderly and disabled people. This system operates on a pay-as-you-go basis, meaning that the current contributions from workers are used to pay benefits to current beneficiaries.
Each payday, some of your pay is withheld as a payroll deduction for Social Security. What happens to the money that is withheld?
It is used to provide medical benefits to Americans over 65.
It is redistributed as cash transfers to workers who are injured on the job.
It is put into an account under your name to earn interest until you retire.
It is redistributed as cash transfers to elderly and disabled people.
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