How is Social Security primarily funded?

Social Security is primarily funded through a system of taxes that are paid by both workers and their employers. This process is established under the Federal Insurance Contributions Act (FICA), which mandates payroll taxes specifically designed to fund Social Security and Medicare. Workers contribute a certain percentage of their earnings, matched by their employers, into the Social Security trust fund. These funds are then used to provide retirement, disability, and survivor benefits to eligible individuals.

The reliance on this payroll tax system is crucial because it creates a direct link between the contributions made by current workers and the benefits received by retirees. This model helps ensure that the funding for Social Security is stable and based on the earnings of a large workforce over time. By pooling these contributions within a federal trust fund, the program can maintain financial support for beneficiaries, reflecting the insurance principle that the program was founded upon.