Final answer:
A Social Security system funded by current workers to pay retirees is known as a Pay-As-You-Go System, which faces challenges due to changing demographics.
Step-by-step explanation:
A Social Security system in which payroll taxes that workers and their employers pay in go directly to retirees and other beneficiaries is known as a Pay-As-You-Go System. This contrasts with privatized social security, a defined contribution system, or a Social Security Trust Fund. Pay-As-You-Go Systems rely on the payments of current workers to fund current benefits, and demographic factors significantly impact their effectiveness. With an aging population and a smaller ratio of workers to retirees, the long-term sustainability of such systems is challenged. Proposals to support the future of Social Security include removing the cap on wages subject to the payroll tax and moving towards programs where workers save funds over their lifetimes.