Personal Finance

Social Security 2025: These States Will Get the Smallest COLA Pay Bumps Next Year 

Chris MacDonald

Published: October 8, 2024 7:52 am

Last Updated: February 16, 2025 4:00 pm

Estimates vary with respect to the degree to which the social security administration (SSA) will increase distributions to seniors in the form of a cost of living adjustment (COLA) in 2025. That said, the vast majority of experts estimate this increase will come in around 2.5% when the ultimate decision is made to post next year’s COLA in just a few days. That’s based on current expectations for where inflation readings will come in for the third quarter, which these adjustments are based on.

That’s at a national level, though. Various states have different costs for essential goods and services. Whether it’s housing, food or healthcare, metropolitan areas may see higher costs of living compared to rural areas. This means larger COLAs could be seen in high-cost areas, in order to preserve retirees’ purchasing power.

Additionally, states with lower median incomes typically have a greater number of retirees receiving smaller social security payments. Accordingly, since cost of living adjustments are calculated as a percentage of these benefits, lower initial amounts can mean smaller overall increases to recipients’ overall checks.

With that in mind, let’s look at the states which are expected to have the smallest COLA increases over the next year.

Key Points from 24/7:

• Annual cost of living adjustments made by the social security administration are not evenly dispersed.
• Based on median incomes in various areas, certain states have smaller increases than others – here’s where retirees can expect to see the smallest social security increases next year.
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States With the Smallest Cost of Living Adjustments in 2025

Given the aforementioned reality that the adjustments sensors will see come off of a base tied to median earnings in a region, states vary in their distributions to seniors. Here are the the ten states where retirees are expected to receive the smallest COLA increases in dollar amounts:

1. Mississippi: Median benefit of $1,673; increase of approximately $41.80.
2. Louisiana: Median benefit around $1,700; increase of about $42.50.
3. New Mexico: Median benefit near $1,750; increase of roughly $43.75.
4. Alabama: Median benefit approximately $1,800; increase around $45.00.
5. West Virginia: Median benefit about $1,850; increase of around $46.25.
6. Maine: Median benefit approximately $1,900; increase of about $47.50.
7. Montana: Median benefit near $1,950; increase of roughly $48.75.
8. California: Despite higher living costs, median benefit is about $2,000; increase around $50.00.
9. Washington D.C.: Median benefit approximately $2,050; increase of about $51.25.
10. Alaska: Median benefit around $2,100; increase of roughly $52.50.

As would be expected, the states receiving the smallest benefits are the ones with the lowest relative median incomes. That’s the way the system works. Thus, retirees in these areas may certainly be getting the short end of the stick, particularly if they experience similar costs to others in more wealthy states.

But, as mentioned previously, social security payments are household specific. Households who were top earners in these states would most certainly have much higher distributions – this is the median in each state. Most economists use median data to indicate what the average person would receive, since averages are highly tilted toward a few very high earning individuals and don’t accurately represent the population.

So, if you’re a relatively average worker in one of these core states, this will likely be roughly approximate to your annual increase over the coming year, assuming a 2.5% increase is in the cards.

Factors Influencing Lower Benefits

Cost of living measures are certainly hard to define and make specific to every household. Indeed, it’s true that one’s lifetime salary will affect their ability to afford retirement on social security alone. For example, a $75,000 per year salary may more than suffice to cover living costs in one particular state, but not another. Thus, it really depends on where one is domiciled when they apply for benefits, and how much they earned over their lifespan.

Many factors go into choosing a location. But many retirees often choose to balance affordability with a decent quality of life, as lifestyle is increasingly important for everyone – not just those in their golden years. But making a budget, and ensuring one can live off that budget in retirement, is and important task for most of us to consider.