In certain states, retirees will receive higher cost-of-living adjustments (COLAs) in 2025.
Social Security recipients receive an annual cost-of-living adjustment (COLA) to protect the purchasing power of benefits from inflation. The Social Security Administration cannot calculate the official COLA for 2025 until the Labor Department releases September’s consumer price index data. This will occur on Thursday, October 10, at 8:30 a.m. ET.
However, the Senior Citizens League, a nonprofit advocacy group, estimates that benefits will increase by 2.6% next year. If that estimate proves correct, it would be the smallest increase (measured in percentage points) for retirees since 2021. However, that hypothetical 2.6% COLA would translate into a larger increase (measured in dollars) for retirees in certain states.
Read on to see the 10 states where retirees are likely to receive the highest COLAs in 2025.
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Social security benefits depend on lifetime income and eligibility age
The Social Security benefits paid to a retiree are based on their lifetime earnings and their eligibility age. Specifically, a formula is applied to inflation-adjusted earnings from the 35 highest-paying years of work to determine their Primary Insurance Amount (PIA), which is the benefit they will receive if they claim Social Security benefits at full retirement age.
Next, the PIA is adjusted for early or delayed retirement. Workers who claim benefits before reaching full retirement age will receive a lower benefit, meaning they will receive less than 100% of their PIA. Workers who delay claiming benefits beyond full retirement age will receive a higher benefit, meaning they will receive more than 100% of their PIA.
The state of residence does not directly influence the formula. However, geographic location plays an indirect role simply because median income varies from state to state.
Retirees in these 10 states will receive the highest COLAs in 2025
The Social Security Administration publishes an annual statistical supplement that provides an anonymized breakdown of benefit data by variables such as age, gender, and geography. The following list is from the 2024 statistical supplement, and includes the 10 states with the highest average 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 USD
- Minnesota: 1,982 USD
- Indiana: 1,952 USD
- Massachusetts: 1,946 USD
Generally speaking, retirees in the 10 states listed above will receive the highest COLAs in 2025 simply because they are starting from higher bases. I’m not referring to benefit increases in percentage points, but in dollars. COLAs are calculated as a percentage of current payments, so retirees with higher benefits will always receive higher COLAs.
For example, if the COLA for 2025 is 2.6%, the average retiree in New Jersey can expect to receive an additional $54.60 in monthly benefits next year (that’s $2,100 multiplied by 2.6%). Similarly, the average retiree in Massachusetts can expect an additional $50.60 in monthly benefits next year. In the 10 states where retiree benefits are increasing the most, the average increase would be between $50.60 per month and $54.60 per month if the COLA is actually 2.6%.
The next logical question is why retirees in certain states receive higher benefits. The main reason is that the median income is higher in certain states. Five of the states listed above – New Jersey, New Hampshire, Maryland, Washington and Massachusetts – are among the top 10 states with the highest median income. And three states – Connecticut, Delaware and Minnesota – have a median income above the national average.
Chance is another reason why retirees receive higher social benefits in certain states. Some people inevitably decide to move after they retire, and in this case there is no correlation between their pension and the average income in their state of residence.
This may explain why California and Washington DC are simultaneously among the top 10 states (or counties) with the highest median income and the top 10 states (or counties) with the lowest median income in Social Security. Both areas have a relatively high cost of living, so a disproportionate number of workers may move away after they retire.
