They’re paid out according to their contributions. But they’re paid with money current workers are paying in. It is technically a ponzi, but was designed to be sustainable instead of promising reckless profits.
It’s technically not a ponzi, it’s just a standard pay-as-you-go system which requires some sort of growth in revenues (such as population growth or changes in taxation) to be sustainable.
A ponzi scheme is fraud that can never pay out what it promised.
It can also be sustainable if the surplus during population growth are invested and not spent.
Somehow with these systems governments are very silent when they can skim off the top because more people are paying in and they can use that money to patch other holes in the budget, but they somehow become very critical of the system once that money would need to be paid back from the budget.
The money they paid was so that their parents and grandparents had a little something going into retirement.
Are your parents paid out according to your contributions or their own?
They’re paid out according to their contributions. But they’re paid with money current workers are paying in. It is technically a ponzi, but was designed to be sustainable instead of promising reckless profits.
It’s technically not a ponzi, it’s just a standard pay-as-you-go system which requires some sort of growth in revenues (such as population growth or changes in taxation) to be sustainable.
A ponzi scheme is fraud that can never pay out what it promised.
It can also be sustainable if the surplus during population growth are invested and not spent.
Somehow with these systems governments are very silent when they can skim off the top because more people are paying in and they can use that money to patch other holes in the budget, but they somehow become very critical of the system once that money would need to be paid back from the budget.
Exactly. It’s a system that works almost entirely as a pay-as-you-go system, with each generation paying for the retirement of their elders.