Social Security Update: Map shows states with the smallest increases

While no cost-of-living adjustment has yet been announced for Social Security payments in 2025, economists expect the increase in payments based on the inflation rate to be around 2.57 percent.

That's significantly less than the increases this year and in 2023, which were 3.2 percent and 8.7 percent, respectively.

However, the actual increase depends on many factors, including retirement age and lifetime income. Where you live may also play a role, as some states have higher incomes and therefore higher Social Security contributions.

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According to Motley Fool, these are the states with the lowest projected increases for 2025 and their median Social Security payment for December 2023:

• 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

Because these states have the lowest median Social Security payments, their monthly benefits will increase less, on average, in 2025 due to the cost-of-living adjustment (COLA) than in other states.

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While Mississippi would only see a $41.80 increase in the median pension amount of $1,673, New Jersey residents would see an average monthly increase of $52.50 to the median pension amount of $2,100.

“Typically, lower Social Security payments are related to the state's median income, and many of the states with the smallest increases have that common element,” said Alex Beene, a financial literacy lecturer at the University of Tennessee at Martin. News week.

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“COLA adjustments are made as a percentage of the existing benefit amount. So if you already receive a lower average monthly payment than in other states, the adjustment will be made in line with the existing benefit.”

Of course, the exact change in your benefits will depend on your retirement age and income level, but in states where average income tends to be lower, residents generally receive lower benefits.

“While this may seem like a problem for recipients in these states, in reality most have already become accustomed to the lower monthly payments they already receive and any adjustment would be in line with their expectations,” Beene said.

The 2025 COLA will not be announced until October 10, when more inflation data for September is available, but current estimates suggest the increase for seniors will be far smaller than in the previous two years.

If the COLA is around 2.5 percent in 2025 as expected, it would be the lowest rate since 2021.

Kevin Thompson, a financial expert and founder and CEO of 9i Capital Group, said the COLA is likely to hit lower-income states harder, largely because of increased food prices.

“Prices are not coming down and the COLA is not keeping pace with these increases,” Thompson said Newsweek“Items that were once nothing special, such as cell phones, are now becoming indispensable. In addition, some states, such as New Mexico and Montana, tax Social Security benefits, which further reduces the net income of beneficiaries in those states.”

While many Americans derive most of their retirement income from Social Security, Thompson says the Social Security system was never intended to fully fund retirees' retirement years.

“It was designed primarily as a support for older workers, people with disabilities and survivors of deceased spouses,” Thompson said. “But it has evolved into an important public safety net and is the only source of income in retirement for many.”