Social Security recipients receive an annual cost-of-living adjustment (COLA) to help maintain the buying power of their benefits amidst inflation. The Social Security Administration will determine the official 2025 COLA after the Labor Department releases the Consumer Price Index data for September, which is scheduled for Thursday, Oct. 10, at 8:30 a.m. ET.
In the meantime, The Senior Citizens League, a nonprofit advocacy group, predicts a 2.6% increase in benefits next year. If accurate, this would be the smallest percentage raise for retired workers since 2021. However, a 2.6% COLA could still mean a larger dollar increase for retirees in certain states.
Continue reading to discover the 10 states where retired workers are expected to receive the largest COLAs in 2025, report as per the street
Social Security benefits depend on lifetime income and claiming age
The Social Security benefit a retired worker receives is calculated based on their lifetime income and the age at which they claim benefits. Specifically, a formula is applied to the inflation-adjusted earnings from the 35 years they earned the most to determine their primary insurance amount (PIA). This is the benefit they’ll receive if they claim Social Security at their full retirement age.
The PIA is then adjusted depending on whether they retire early or delay retirement. Workers who claim Social Security before reaching full retirement age will receive a reduced benefit, less than 100% of their PIA. Conversely, those who delay claiming Social Security beyond full retirement age will receive a higher benefit, more than 100% of their PIA.
Although the state of residence doesn’t directly influence the formula, geography does have an indirect impact due to varying median incomes across different states.
Retired workers in these 10 states are set to receive the largest COLAs in 2025.
The Social Security Administration’s annual statistical supplement offers an anonymized breakdown of benefit data by age, sex, and geography. The following list, drawn from the 2024 statistical supplement, highlights the 10 states with the highest median monthly Social Security benefit for retired workers as of December 2023.
- New Jersey: $2,100
- Connecticut: $2,084
- Delaware: $2,064
- New Hampshire: $2,039
- Maryland: $2,008
- Michigan: $2,005
- Washington: $1,992
- Minnesota: $1,982
- Indiana: $1,952
- Massachusetts: $1,946
Generally, retired workers in the 10 states listed above will receive the largest COLAs in 2025 because they start with higher benefit amounts [report as per fool.com]. This increase isn’t about percentage points but actual dollars. Since COLAs are calculated as a percentage of current benefits, retirees with larger benefits will always see bigger dollar increases.
For example, if the 2025 COLA is 2.6%, the median retired worker in New Jersey could expect an additional $54.60 in monthly benefits next year (i.e., $2,100 multiplied by 2.6%). Similarly, the median retired worker in Massachusetts could see an additional $50.60 per month. Across these 10 states, where retired-worker benefits are expected to increase the most, the median monthly raise could range from $50.60 to $54.60 if the COLA hits 2.6%.
The next logical question is why retirees in some states receive larger benefits. The primary reason is that median income is higher in certain states. Five of the states listed—New Jersey, New Hampshire, Maryland, Washington, and Massachusetts—are among the top 10 states for median income. Additionally, three states—Connecticut, Delaware, and Minnesota—have median incomes above the national average.
Random chance also plays a role in why retired workers in certain states receive larger Social Security benefits. Some retirees choose to move after retiring, so their benefits may not correlate with the median income in their new state.
This could explain why places like California and Washington D.C. rank among the top 10 for median income but fall in the bottom 10 for median Social Security benefits. Both areas have a high cost of living, so many workers might opt to relocate after retirement.
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Source:
- https://www.fool.com/retirement/2024/08/13/social-security-2025-cola-10-states-biggest-raise/
- https://money.com/social-security-cola-2025-new-prediction/
- https://www.cnbc.com/2024/07/11/inflation-points-to-lower-social-security-cost-of-living-adjustment-in-2025.html
- https://www.ssa.gov/cola/
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