The current Social Security system in the United States operates in a pay-as-you-go framework, which is administered by the federal government. Social Security taxes paid by today’s workers enter into the general fund and are immediately used to pay current claimants (along with earned income from bonds in the two federal trust funds that support the Social Security program). Privatization would eliminate the pay-as-you-go process. Instead, each taxpayer’s contributions would be invested into a separate account for their retirement, that would fluctuate with the value of their investments in the market.
