The Social Security cost-of-living adjustment (COLA) for 2025 is set at 2.5%, marking the lowest increase since 2021. As a result, the average monthly benefit for a retired worker will rise by $49, reaching $1,967.
This annual adjustment ensures Social Security benefits maintain their purchasing power by keeping pace with inflation. While all retirees will see the same percentage increase, individuals in certain states will receive larger nominal boosts due to higher baseline benefits.
How Social Security Retirement Benefits are Calculated
Social Security benefits are primarily determined by a worker’s lifetime income and the age at which they claim benefits. The Social Security Administration calculates a worker’s primary insurance amount (PIA) using the 35 highest-earning years, adjusted for inflation. This amount represents the monthly benefit a worker would receive if they claim Social Security at their full retirement age (FRA).
For those who claim before FRA, benefits are reduced, meaning they receive less than 100% of their PIA. Conversely, workers who delay claiming Social Security beyond their FRA earn delayed retirement credits, increasing their monthly benefit. However, these credits stop accruing at age 70, so delaying beyond this age offers no additional benefit.
Although a worker’s state of residence doesn’t directly influence their benefit, it can have an indirect effect. Since Social Security payments are based on lifetime earnings, and income levels vary by state, the median Social Security benefit also varies across states.
States with the Largest COLAs in 2025
The following ten states will see the highest nominal increases in Social Security benefits for retired workers, based on data from the 2024 statistical supplement:
| State | Median Monthly Benefit (2023) | COLA Increase (2.5%) |
|---|---|---|
| New Jersey | $2,100 | $52.50 |
| Connecticut | $2,084 | $52.10 |
| Delaware | $2,064 | $51.60 |
| New Hampshire | $2,039 | $50.98 |
| Maryland | $2,008 | $50.20 |
| Michigan | $2,004 | $50.10 |
| Washington | $1,992 | $49.80 |
| Minnesota | $1,982 | $49.55 |
| Indiana | $1,952 | $48.80 |
| Massachusetts | $1,946 | $48.65 |
Retirees in these states receive higher monthly Social Security benefits, resulting in larger nominal-dollar COLA increases. For example, retirees in New Jersey will see an average monthly increase of $52.50, compared to the $49 average increase for retirees nationwide.
Why Do Social Security Benefits Vary by State?
The variation in Social Security benefits across states can be explained by differences in median income. States like New Jersey, Maryland, and Massachusetts have higher median incomes, which contribute to higher Social Security benefits. Additionally, states such as Connecticut and Minnesota also exceed the national average in median income, influencing their Social Security payouts.
Interestingly, some states, like Michigan and Indiana, make the top ten in terms of Social Security benefits despite having lower-than-average median incomes. This discrepancy can be partly attributed to retirees relocating to more affordable states after receiving higher benefits from previous, higher-earning states. On the other hand, high-cost areas like California and Washington, D.C., rank among the lowest for median Social Security checks, despite their high median incomes, because many retirees move away to escape the high living costs.
The Role of Cost-of-Living Adjustments
Social Security’s COLA mechanism is designed to protect retirees’ purchasing power by adjusting benefits in line with inflation. However, the percentage increase is uniform across the U.S., meaning that the actual dollar amount of the increase varies depending on the individual’s current benefit. Those in states with higher average benefits will see larger nominal increases, even though the percentage increase remains the same for everyone.
FAQs
1. What is the Social Security COLA for 2025?
The COLA for 2025 is 2.5%, resulting in an average monthly benefit increase of $49 for retired workers.
2. How are Social Security benefits calculated?
Benefits are calculated based on a worker’s lifetime earnings, adjusted for inflation, and the age at which they claim benefits. The calculation uses the 35 highest-earning years to determine the primary insurance amount (PIA).
3. Why do Social Security benefits vary by state?
Social Security benefits vary by state due to differences in median income, which affects lifetime earnings. Additionally, retirees may relocate, affecting state-by-state benefit averages.
4. When do delayed retirement credits stop accruing?
Delayed retirement credits stop accruing at age 70. Claiming benefits after this age does not increase the monthly payout further.
5. Which states will see the highest nominal COLA increases in 2025?
States like New Jersey, Connecticut, and Delaware will see the highest nominal increases because they already have the highest median Social Security benefits.
I have the funny looking Bicentennial quarter. I got it in a roll from bank. I guess I should relook at it.