This article looks at the 2025 Social Security COLA falls short: discover 11 best states to retire and offset the gap. You may skip our detailed analysis and jump to 2025 Social Security COLA Falls Short: Discover the 5 Best States to Retire and Offset the Gap.
2025 Social Security COLA and Best States to Retire
The Social Security Administration will be announcing an official 2025 Social Security Cost-Of-Living-Adjustment (COLA) very soon, following the release of the September Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) on October 10th, 2024. That’s right, the much-anticipated date for an estimated 68 million Americans receiving Social Security benefits in the US is almost here. According to a Gallup survey, these checks are a major source of income for a third of retirees. It’s no surprise that the upcoming announcement and related news are sparking both anticipation and concern among those who depend on these benefits.
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To help seniors keep up with inflation, the SSA adjusts the Social Security benefits at the beginning of each calendar year based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). As per the Bureau of Labor Statistics (BLS), the COLA is defined as the “percent increase between the third quarter average of the CPI-W for a given year and the previous peak third-quarter average of the CPI-W”. Based on this definition, the number that’s missing for the final COLA announcement is the September Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The Bureau of Labor Statistics is scheduled to release this number on October 10th, not long after which the COLA will be announced. After calculating the difference increase of the average CPI-W for the third quarter of 2024 compared to the average CPI-W for the third quarter of 2023, it will be rounded to the nearest tenth of 1%. Looking at the current inflation data, the COLA for 2025 is expected to be around 2.5%. This is lower than the 2024 COLA of 3.2%. While a falling COLA is indicative of falling inflation, many seniors are going to be far from pleased with the modest raise.
A TSCL 2024 Retirement Survey reveals how one of the top retirement concerns for seniors is their depleting retirement savings due to persistently high prices. 78% of the seniors surveyed reveal how their monthly budget for essentials like housing, food, and essentials has been higher than last year. More importantly, 75% say they want Congress to pass legislation that would base the COLA on the CPI for the Elderly (CPI-E) instead of the CPI-W.
CPI-E is an index that is more specific to seniors, and hence better reflects the spending patterns and inflationary pressures experienced by older adults, making it a more accurate measure of their financial needs. This shift could potentially lead to higher benefits for seniors, as the CPI-E takes into account costs that disproportionately affect them, such as healthcare and housing.
The fear of outliving one’s retirement savings is growing now more than ever due to a myriad of factors. Social Security funds are expected to deplete less than a decade from now, people are living longer and need more to survive, and Americans can save less in general due to the high costs of living in the country. This is why BlackRock, Inc. (NYSE:BLK) CEO Larry Fink believes capital markets can help solve the problem revolving around the ability of Americans to afford retirement as their lifespan elongates. According to Fink, having access to investing can help people retire in a financially sound manner.
“Today in America, the retirement message that the government and companies tell their workers is effectively: ‘You’re on your own,”. And before my generation fully disappears from positions of corporate and political leadership, we have an obligation to change that.”
– Larry Fink.
Here’s what Jim Cramer says about Larry Fink and his company.
“Larry Fink’s done an incredible job, not only in making money but also in producing the best asset management software. I don’t think this company gets nearly enough credit for either and its stock deserves to trade higher. I think you could break out here.”
In the second quarter of 2024, BlackRock, Inc. (NYSE:BLK) beat earnings expectations with a reported EPS of $10.36, while expectations were $9.98. The investing firm delivered its highest growth rates of the post-pandemic period, with double-digit operating income growth and a 160 basis point margin expansion. The firm saw over $80 billion in net new assets and ended the quarter with a record $10.6 trillion in AUM, showcasing strong performance and growth momentum. According to the Insider Monkey database, 47 out of 912 hedge funds tracked by Insider Monkey held stakes in BlackRock, Inc. (NYSE:BLK), up from 45 in the previous quarter.
While we acknowledge the potential of BLK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BLK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Photo by Joshua Hoehne on Unsplash
Methodology
To compile the list of best states to retire in the US to offset the gap caused by the small 2025 Social Security COLA, we incorporated both existing rankings and updated data on critical factors like cost of living, housing affordability, taxes, and access to healthcare. The rankings were derived from previous score assessments, with new data integrated to reflect current conditions. A final Insider Monkey score was then assigned to each state, with those scoring higher ranked as more advantageous for retirees looking to stretch their income during retirement. The cost of living index has been sourced from Missouri Economic Research & Information Center, while median home prices are taken from Redfin Corporation (NASDAQ:RDFN).
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With that said, let’s head over to the best states to retire in the US:
11. South Carolina
Insider Monkey Score: 54
Cost of Living Index: 95.5
Median Home Price: $380,700
Retirement Tax-Friendliness: Tax-Friendly
One of the best states to retire in the US to offset the gap by the potentially smaller 2025 Social Security COLA is South Carolina. Affordable home prices, lower-than-national median home prices, and tax-friendliness make it a great place to settle down in one’s golden years. There are no taxes on Social Security benefits, and there is a $10,000 taxable income deduction available for seniors receiving other types of retirement income. The state boasts some of the lowest property taxes in the country.
10. Nevada
Insider Monkey Score: 88
Cost of Living Index: 102.6
Median Home Price: $465,000
Retirement Tax-Friendliness: Very Tax-Friendly
Nevada’s cost of living may be a tad bit higher than the national average, but it’s one of the most tax-friendly states one can retire to. There is no state income tax, which means all income at the state level goes tax-free to retirees. Property taxes in the state are also relatively lower, even though sales tax is higher than the national average. Nevertheless, there are sales tax exemptions that benefit seniors, such as on groceries, newspapers, and prescription drugs.
9. Texas
Insider Monkey Score: 89
Cost of Living Index: 91.7
Median Home Price: $348,300
Retirement Tax-Friendliness: Tax-Friendly
Being one of the few states that don’t have an income tax, Texas deserves a place on our list of best states to retire in the US. Its combination of tax-friendliness, affordable cost of living, and lower-than-national median home prices make it a strong candidate on our list. However, every state has its pros and cons. For Texas, the setback is high property and sales taxes. Similar to Nevada, there are sales tax exemptions available on groceries, over-the-counter medicine, and prescription drugs. There are several property relief programs for seniors too.
8. Michigan
Insider Monkey Score: 97
Cost of Living Index: 90.9
Median Home Price: $270,800
Retirement Tax-Friendliness: Tax-Friendly
Michigan offers good healthcare options, though costs can vary depending on the area. Its low cost of living (9% below the national average), affordable median home price of $270,800, and tax-friendly policies, further allow retirees to maximize their savings while enjoying a good quality of life.
7. Mississippi
Insider Monkey Score: 113
Cost of Living Index: 87.7
Median Home Price: $256,000
Retirement Tax-Friendliness: Very Tax-Friendly
Mississippi boasts one of the lowest costs of living in the country. Living expenses here are 12% lower than the national average. Moreover, home prices are also some of the most affordable at a median home price of $256,000 as per Redfin Corporation (NASDAQ:RDFN). All sorts of retirement income in the state goes tax-free, which also makes it an extremely tax-friendly state to retire to. Undoubtedly, it is one of the best states to retire in the US in light of the smaller 2025 Social Security COLA.
6. Georgia
Insider Monkey Score: 126
Cost of Living Index: 90.9
Median Home Price: $372,300
Retirement Tax-Friendliness: Very Tax-Friendly
Next on our list of best states to retire in the US is Georgia. Living expenses in the state are 9% lower than the national average, and home prices are well below the national median as well. Combine this with its tax-friendliness, and seniors are going to have a much easier time retiring to the state in light of the smaller Social Security COLA increase.
5. Delaware
Insider Monkey Score: 136
Cost of Living Index: 100.5
Median Home Price: $365,000
Retirement Tax-Friendliness: Tax-Friendly
Delaware offers a cost of living close to the national average, with a median home price of $365,000 according to Redfin Corporation (NASDAQ:RDFN). This makes it an affordable option for retirees. Its tax-friendly policies, including no sales tax, enhance its appeal. The state’s coastal charm and moderate climate further contribute to its desirability for retirees.
4. Tennessee
Insider Monkey Score: 146
Cost of Living Index: 90.8
Median Home Price: $385,900
Retirement Tax-Friendliness: Tax-friendly
Tennessee’s low cost of living and no state income tax make it a top retirement destination. Home prices in the state are well below the national average, standing at an estimated $385,900. The state’s tax-friendly environment is ideal for retirees seeking affordability. Additionally, Tennessee offers scenic beauty and cultural experiences in cities like Nashville and Chattanooga.
3. Florida
Insider Monkey Score: 150
Cost of Living Index: 102.4
Median Home Price: $403,300
Retirement Tax-Friendliness: Very Tax-Friendly
The Sunshine State of Florida is always going to be a retiree-favorite. That said, its very tax-friendly retirement policies, including no state income tax, attract retirees seeking financial ease. With a diverse range of retirement communities and a median home price of $403,300, it remains a popular destination. The state’s warm climate and numerous recreational activities further enhance its appeal.
2. South Dakota
Insider Monkey Score: 170
Cost of Living Index: 91.2
Median Home Price: $320,900
Retirement Tax-Friendliness: Very Tax-Friendly
South Dakota has previously topped our list of best states to retire in the US in 2024. It remains one of the most tax-friendly environments for retirees, with no state income tax and a low cost of living. The median home price of $320,900, coupled with its scenic landscapes and outdoor activities, makes it a top choice for those seeking tranquility and affordability.
1. Wyoming
Insider Monkey Score: 179
Cost of Living Index: 92.8
Median Home Price: $275,000
Retirement Tax-Friendliness: Very Tax-Friendly
Making it to the top on our list of best places to retire in the US amidst the 2025 Social Security COLA shortfall is the state of Wyoming. The state’s very tax-friendly status, with no state income tax and a median home price of $275,000, makes it the most affordable option on the list. Its low cost of living, coupled with stunning natural beauty and wide-open spaces, offers retirees a peaceful and financially secure retirement.
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Disclosure: None. This article was originally published on Insider Monkey.
