Final answer:
The government collects money for U.S. Social Security and Canadian pension taxes, which are forms of retirement insurance. Workers and their employers contribute to these funds through payroll taxes, and although such programs may reduce private savings, they provide a guaranteed benefit for retirees.
Step-by-step explanation:
The money for U.S. Social Security and Canadian pension taxes, which are considered planned savings or retirement funds, is collected by the government. These programs use payroll taxes that are taken directly out of workers' paychecks, with workers contributing a specific percentage of their income. For Social Security, this includes a 6.2% contribution from both the employee and the employer, up to a certain wage limit. This system of taxation and benefits provides income and health care benefits to the elderly after retirement, and operates like an automatic enrollment in retirement savings.
While pension plans in both the private and public sectors are increasingly being eliminated, retirement insurance programs like Social Security and Medicare remain essential. However, it is worth noting that the existence of Social Security might influence individuals to save less private financial capital for retirement, as they count on government checks to support them in their later years.
Another retirement savings option available to workers is through their workplace, where they can invest in financial products like stocks, bonds, and annuities through accounts such as 401(k)s, which have a special tax status that defers taxes until the funds are withdrawn.