Ponzi and pyramid schemes are defined as fraudulent investing scams that promise high returns with little risk to investors. In order for these types of schemes to work, an influx of new investors is needed for the funds to be available to pay the old investors.

America's Social Security program displays the same characteristics as these schemes because Social Security recipients are not paid with the money that the government deducted directly from them and their past employers. Instead that money was used to pay the benefits for past retirees, while current retired recipients are getting their money through Americans who are currently working and contributing to the system.

In other words, when someone claims that their social security benefits are their money that they put in, they are technically wrong because their money was used to pay someone else.

A Brief History

Social Security first began as a dream proposed by President Franklin Roosevelt in 1934 that was inspired by the Social Insurance programs of Europe. The idea was simple—everyone chips in so that the widowed, disabled, and elderly can have a monthly stipend to provide them with some economic security when their ability to work and earn is limited.