US to phase out most paper checks for federal benefits
The federal government will begin phasing out paper checks for Social Security and other federal payments by September 30.
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Former Social Security Administration Secretary Martin O’Malley says high-income Americans should spend more on Social Security to keep the program flexible enough to continue paying full benefits to beneficiaries.
In an interview aired Monday on NewsNation’s “The Hill,” O’Malley said lawmakers should raise the cap on income subject to the Social Security payroll tax, rather than pursue cuts to benefits. In 2026, the maximum income subject to the 6.2% Social Security payroll tax is $184,500. Any income above that amount is exempt from Social Security taxes.
If no action is taken, the trust fund that supplements the payroll taxes that come in to pay monthly Social Security benefits is projected to run out in the final three months of 2032, forcing an immediate across-the-board 22% benefit cut, the board’s latest report said last week.
“Only 6% of people are benefiting from the cap, and even fewer, three or four, are benefiting from the removal of the cap on incomes above $250,000,” O’Malley told host Blake Berman. “Mr. Blake, most Americans think it’s unfair that wealthy people don’t pay the same tax rate as school custodians and teachers.”
Mr. O’Malley’s idea is one of many proposed to prevent cuts in Social Security benefits. Other measures include raising the full retirement age, raising payroll taxes and capping benefits.
For the past 16 years, the cost of Social Security’s retirement program has exceeded the amount it receives from payroll taxes, forcing it to draw down its trust fund reserves to make up the shortfall. Last year, the trust fund was projected to run out in 2033, but the deadline was pushed back in August to the end of 2032 under tax provisions in the One Big Beautiful Bill Act, passed nearly a year ago.
If Congress allows the trust fund to be emptied, the program would only pay out what the government collects in taxes. The nonprofit Committee for a Responsible Budget estimates that on average, beneficiaries will lose about $500 a month.
“This should be a wake-up call. Congress needs to act,” said Myekia Minter Jordan, chief executive of AARP, a nonprofit, nonpartisan group representing seniors. “Americans have worked hard and paid into Social Security throughout their lives, so it makes sense that they would rely on it in retirement.”
Why is November important to Social Security?
Analysts said the senators elected in November will be in the bracket of either depleting Social Security’s trust fund or reforming the program.
“While these bankruptcy dates may seem abstract and far away, the reality is that senators elected in 2026 will be in office when Social Security reaches bankruptcy status,” said Margaret Spellings, president and CEO of the Bipartisan Policy Center. “The question is no longer whether these challenges need attention, but whether Washington will find the will to act.”
According to the nonprofit, nonpartisan Peterson Foundation poll, conducted jointly by the Democratic Party’s Global Strategy Group and the Republican Party’s North Star Opinion Research, in late May:
- 96% of voters nationwide want candidates to clearly explain their plans to prevent automatic cuts to Social Security benefits.
- This includes 96% of Democrats, 92% of independents, and 97% of Republicans.
- It also includes at least 94% of voters in each of the following age groups: 18-29, 30-44, 45-54, 55-64, and 65 and older.
“This research shows that voters across party lines overwhelmingly want solutions from candidates this election season,” said Michael Peterson, the foundation’s chief executive officer.
How can Congress protect Social Security benefits?
It’s not that there’s a lack of ideas to “fix” Social Security so that benefits don’t get cut, there’s just a lack of will. Over the past few years, the following proposals have been made:
- The “six-digit limit,” or the cap on annual Social Security benefits for married couples, would be set at $100,000.
- Raise or eliminate the cap on income that can be taxed to fund Social Security benefits. In 2026, only income up to $184,500 will be taxed to pay benefits.
- Raise payroll taxes by 12.4% on your income that goes towards paying Social Security. Payroll taxes are typically split 50-50 between you and your employer, so you each pay 6.2%.
- Raise your full retirement age to maximize your Social Security benefits. Until the 1980s, age 65 was considered the full retirement age, but in 1983, with Social Security facing bankruptcy, Congress passed a bill to gradually raise the full retirement age to 67. It will reach 67 years old in 2026, and some researchers believe it should be raised again.
“As in 1983, lawmakers can enact reforms that guarantee the fiscal health of the program for another 75 years or forever,” wrote Stephen Nunez, director of stratified economics at the progressive Roosevelt Institute. “In fact, we could have done so (at significantly lower cost) at any point in the last 20 years.”
Congress has “many options to close the deficit and secure the Social Security Trust Fund for future unforeseen developments. The question is not whether we can rebuild Social Security, but who will pay for it when we do.”
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday..
