While adjustments to the cost of living for Social Security benefits for 2025 have not yet been made, economists expect the payment increase to be around 2.57%, based on inflation rates. This is much lower than the increases seen this year and in 2023, which were 3.2% and 8.7%, respectively.
The actual increase, however, will depend on a variety of factors, such as retirement age and lifetime earnings. Location can also be important, as some states tend to have higher incomes and consequently higher Social Security benefits.
States With the Lowest Estimated Cola Increases for 2025
Since these states have the lowest median Social Security payment amounts, the cost of living adjustment (COLA) will cause their benefits to grow less on average than in other states for 2025. While residents in Mississippi would see only a $41.80 increase in the state’s average benefit of $1,673, those in New Jersey would enjoy a monthly average increase of $52.50 on the median retirement benefit of $2,100.
- Mississippi: $1,673
- Louisiana: $1,674
- New Mexico: $1,696
- District of Columbia: $1,696
- Arkansas: $1,717
- Alaska: $1,733
- Maine: $1,741
- Kentucky: $1,748
- Montana: $1,751
- California: $1,767
Retirees and Beneficiaries to Receive News Very Soon
“Typically, lower Social Security payouts are tied to the state’s median income, and many states with the smallest increases share this common trait,” remarked Alex Beene, a financial education instructor at the University of Tennessee in Martin. “COLA adjustments are applied as a percentage of the existing benefit amount, so if you are already receiving a lower average monthly payment compared to other states, the adjustment will be relative to the existing benefit.”
Of course, the exact modification in your benefit will depend on your chosen retirement age and income level. Still, states with generally lower median incomes typically have residents with smaller benefit amounts. “Though this may seem problematic for beneficiaries in these states, most have already adapted to the lower monthly payments they receive, and any adjustments will follow their expectations,” Beene noted.
The Dates for the 2025 COLA — When to Expect the Final Number
The COLA for the upcoming year 2025 won’t be announced until more inflation data for September is available, on October 10th. Current estimates suggest that seniors will see a much lower increase than in the prior two years.
If COLA is around 2.5%, as anticipated, the year 2025 will see the lowest adjustment since 2021. Kevin Thompson, a finance expert and CEO of 9i Capital Group, mentioned, “COLA is likely to more severely impact lower-income states, especially given the rising food prices.”
“Prices are not going down and COLA is not adjusting to these increases,” Thompson commented. “Items once considered discretionary, like cell phones, are now essential. Moreover, some states, like New Mexico and Montana, tax Social Security benefits, which further reduces the net income of beneficiaries in those areas.” Although many US citizens rely on Social Security for most of their retirement income, Thompson emphasized that “the safety net program was never intended to fully fund seniors’ golden years.”
