2025 Social Security COLA: Retirees in these 10 states set for the largest raises
Certain states will see higher cost-of-living adjustments (COLAs) for retirees in 2025.
Each year, Social Security beneficiaries receive a cost-of-living adjustment (COLA) to help maintain their purchasing power amid inflation. The Social Security Administration will not be able to determine the official 2025 COLA until the Labor Department releases the Consumer Price Index data for September. This will occur on Thursday, October 10, at 8:30 a.m. ET.
The Senior Citizens League, a nonprofit group, predicts a 2.6% increase in benefits for next year. If this estimate is correct, it would represent the smallest percentage increase for retirees since 2021. Nonetheless, this projected 2.6% COLA could mean a more significant dollar increase for retirees residing in specific states.
Continue reading to discover the 10 states where retirees are likely to see the most substantial COLAs in 2025.
Social Security benefits are influenced by lifetime earnings and retirement age
The amount received by a retired worker from Social Security is determined by their lifetime earnings and the age at which they claim their benefits. A specific formula applies to calculate the inflation-adjusted earnings from the 35 years when they earned the most, which results in their primary insurance amount (PIA). This is the benefit amount if they claim Social Security at their full retirement age.
The PIA is then adjusted based on when they retire. Claiming Social Security before full retirement age results in a reduced benefit. In contrast, delaying benefits past this age yields a larger benefit—more than 100% of their PIA.
The specific state of residence does not directly influence this formula. Nonetheless, geographic differences do indirectly affect outcomes since median incomes vary by state.
Top 10 states where retirees will see the highest COLAs in 2025
The Social Security Administration releases an annual statistical supplement detailing benefit data by variables such as age, gender, and location. The following list derives from the 2024 statistical supplement and highlights the 10 states with the highest median monthly Social Security benefits for retirees 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
In general, retirees in the aforementioned states can expect the most considerable COLAs in 2025 since their starting benefits are already higher. The focus here is on the dollar amount rather than the percentage increase, as COLAs are determined based on current benefits. Hence, those with larger base benefits will always gain more from COLAs.
For example, if the COLA for 2025 is indeed 2.6%, the median retiree in New Jersey could see their monthly benefits rise by $54.60 (i.e., $2,100 multiplied by 2.6%). Similarly, a median retiree in Massachusetts might gain an additional $50.60 monthly. Across the 10 states with the largest potential increases, the median monthly rise may range from $50.60 to $54.60 if the COLA lands at 2.6%.
One key question arises: why do retirees in certain states receive more substantial benefits? A major factor is that median incomes are higher in some states. Among the 10 states listed, five—New Jersey, New Hampshire, Maryland, Washington, and Massachusetts—are positioned within the top 10 for median income. Additionally, three states—Connecticut, Delaware, and Minnesota—have median incomes exceeding the national average.
Another aspect is chance. Some retirees relocate upon reaching retirement age, resulting in no correlation between their benefits and their state’s median income.
This may clarify why California and Washington D.C. appear among the top 10 in median income while ranking in the bottom 10 for median Social Security benefits. Both areas have a high cost of living, leading many higher-earning workers to leave upon retirement.
The Motley Fool maintains a disclosure policy.
The $22,924 Social Security bonus many retirees overlook
Offer from the Motley Fool: If you’re like many Americans, you’re probably behind on your retirement savings. However, knowing a few “Social Security secrets” could help increase your retirement income. For instance, there’s a simple trick that could potentially add as much as $22,924 to your annual income!
Understanding how to enhance your Social Security benefits can lead you to retire with assurance and the tranquility we all desire.
