Every year, Social Security recipients receive an annual cost-of-living adjustment (COLA) to help offset the impact of inflation and ensure their benefits maintain purchasing power. While the official 2025 COLA won’t be confirmed until October 10, 2024, at 8:30 a.m. ET, early predictions are already stirring anticipation.
The Senior Citizens League, a nonprofit advocacy group, has forecasted a 2.6% increase, which, if accurate, would be the smallest since 2021. However, this relatively modest percentage increase will still result in significant dollar amounts for retirees in certain states.
COLA
The COLA is designed to ensure that Social Security benefits keep pace with inflation. The adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), with the official figure released after September’s data.
For 2025, if the prediction of a 2.6% increase holds, it would mark a notable drop from the previous year’s adjustments, reflecting a cooling inflation rate. Despite the smaller percentage, the actual dollar increase will be more substantial in states where retirees already receive higher-than-average benefits.
State-by-State Benefits
The size of a retiree’s Social Security benefit is influenced by their age at retirement and their lifetime earnings. The primary insurance amount (PIA) is calculated based on the inflation-adjusted wages from a retiree’s 35 highest-earning years. If a worker claims Social Security at their full retirement age, they receive 100% of their PIA. Claiming benefits earlier results in reduced payments, while delaying beyond full retirement age leads to larger benefits, exceeding the PIA.
According to the 2024 Statistical Supplement from the Social Security Administration, the states with the highest average monthly Social Security benefits as of December 2023 are as follows:
| State | Average Monthly Benefit (Dec 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 |
Retirees in these states will likely see the largest dollar increases in their benefits due to the 2025 COLA. For example, a 2.6% COLA would translate to an additional $54.60 per month for retirees in New Jersey, where the average monthly benefit is $2,100. Similarly, retirees in Massachusetts can expect about $50.60 more each month.
Some States Offer Higher Benefits
The variation in Social Security benefits across states can be attributed to several factors:
- Higher Median Incomes: States with higher median incomes generally have retirees who earned more during their working years, leading to higher Social Security benefits. For instance, New Jersey, New Hampshire, Maryland, Washington, and Massachusetts—all in the top 10 for median income—also rank among the highest for average Social Security benefits.
- Geographical Differences: While the Social Security formula doesn’t directly consider state residency, the median income levels indirectly influence benefit amounts. States like Connecticut, Delaware, and Minnesota, with median incomes above the national average, tend to have higher Social Security benefits.
- Post-Retirement Relocation: Some retirees may move to different states after retirement, which can affect the distribution of benefits across states. High-cost areas like California and Washington, D.C., might see a lower average benefit because more retirees with substantial benefits may choose to relocate to more affordable states.
What Retirees Can Expect
Assuming the 2025 COLA is 2.6%, retirees in the top 10 states for benefits can anticipate monthly increases ranging from $50.60 to $54.60. Although the percentage increase might be modest compared to recent years, the impact on monthly budgets will still be noticeable, especially for those with higher benefits.
This COLA adjustment reflects the ongoing balancing act between inflationary pressures and the need to protect the purchasing power of Social Security recipients. While the official announcement is still pending, knowing these projections helps retirees plan for the year ahead, ensuring they can make the most of their benefits in 2025.
FAQs
When will the official 2025 COLA be announced?
The Social Security Administration will announce it on October 10, 2024.
What is the predicted 2025 COLA increase?
The Senior Citizens League predicts a 2.6% increase.
Why do some states have higher Social Security benefits?
Higher median incomes in these states lead to larger benefits.
How does the COLA affect Social Security payments?
COLA adjusts benefits annually to keep up with inflation.
Will my benefits increase more in dollars or percentage?
High-dollar benefits will see larger increases in dollars, though the percentage remains the same.
