Final answer:
The Social Security Act is funded through payroll taxes, with both employers and employees contributing. These funds go into the Social Security Trust Fund and are used to provide monthly retirement benefits, among other forms of assistance, to eligible individuals.
Step-by-step explanation:
The money for the implementation of the Social Security Act is collected through payroll taxes levied on both employers and employees. Specifically, workers contribute 6.2% of their wages up to a certain income cap, and employers match this contribution, totaling a 12.4% tax on wages up to the cap. Self-employed individuals pay the full 12.4% themselves.
This collected tax funds several provisions of the Social Security Act, which includes old-age pensions for retirees, unemployment insurance in some cases, and aid for persons with disabilities. Retired workers, and their dependents, receive monthly benefits once they reach the eligibility age, which was initially 65 years old. These benefits are calculated based on an individual's earnings over their working life.
The program is designed to be self-sustaining, as envisioned by President Roosevelt and described by the Greenspan Commission in the 1980s, with the collected funds accumulating in the Social Security Trust Fund. The surplus in this trust fund, which amounts to trillions of dollars, is held in special non-marketable Treasury securities.