The Social Security Administration (SSA) publishes the Consumer Price Index for Urban Wage and Office Workers (CPI-WA) for September. This announcement is highly anticipated by the estimated 68 million Americans who rely on these benefits. This adjustment is significant, especially in an era of inflation and rising costs of living, as it is the primary source of income for about one-third of retirees.
Each year, SSA uses the CPI-W as a guide to adjust Social Security benefits to account for inflation. The Bureau of Labor Statistics (BLS) defines COLA as the percentage increase between this year’s CPI-W third-quarter average and the previous year’s highest third-quarter average. Once the September CPI-W is released, SSA will calculate the difference in CPI-W from the third quarter of 2023 to the third quarter of 2024. The final COLA will be rounded to the nearest tenth and will take effect in 2024. Early 2025.
One of the main demands of retirees is a change in the way COLA is calculated. Seventy-five percent of TSCL survey respondents support legislation that would change the COLA standard from CPI-W to Consumer Price Index for Seniors (CPI-E). The CPI-E is a special index designed to reflect the spending habits of older adults and take into account costs that disproportionately impact retirees, such as health care and housing. Switching to CPI-E can significantly increase benefits to help seniors better manage their financial needs.
Based on current economic data, experts predict that the 2025 COLA will be around 2.5%, which would be down from the 2024 COLA of 3.2%. The decline in COLA reflects a decline in inflation, but as the cost of living increases, many retirees may find that small increase isn’t enough to keep up. A survey conducted by TSCL in 2024 found that retirees are increasingly concerned that their savings will dwindle as prices continue to rise. In fact, 78% of respondents said their monthly expenses for necessities like housing and food increased compared to the previous year. The growing fear of outliving your retirement savings is a common concern for many retirees. Social Security is expected to run out of money within the next decade, while increasing life expectancy and rising costs of living are making it difficult for Americans to save enough for retirement.
As Social Security benefits face COLA reductions in 2025, retirees may need to consider moving to more affordable areas to increase their retirement income. Some states offer retirees favorable terms through a combination of cost-of-living reductions and tax benefits.
Here are the top 11 states that will help offset the impact of the 2025 COLA on Social Security benefits
South Carolina: South Carolina has a low cost of living and an affordable median home price, especially since Social Security benefits are not taxed and seniors can claim a $10,000 deduction from other retirement income. , which offers favorable tax treatment for retirees. Nevada: Although the cost of living is slightly above the national average, Nevada has no state income tax and low property taxes, making it a very tax-friendly state for retirees. Food and prescription drug exemptions can also help reduce your overall expenses. Texas: With no state income tax and relatively low cost of living, Texas is a popular retirement destination. Despite high property and sales taxes, retirees benefit from tax exemptions on necessities such as food and medicine. Michigan: Michigan boasts a low cost of living, affordable housing, and tax incentives for retirement income. Medical services vary by region, but are generally well-regarded. Mississippi: Known for its low cost of living and affordable housing prices, Mississippi exempts all retirement income from taxation, making it one of the most tax-friendly states for retirees. Georgia: With a cost of living 9% lower than the national average and affordable housing prices, Georgia offers retirees an attractive combination of economic benefits and a pleasant climate. Delaware: Delaware is a retirement-friendly state with affordable housing and a mild climate, with a cost of living near the national average and no sales tax. Tennessee: Known for its low cost of living and no state income tax, Tennessee is a popular destination for retirees. Housing prices remain affordable, and the state has beautiful scenery and cultural attractions. Florida: A perennial favorite among retirees, Florida is an ideal location for retirees due to its no state income tax and abundance of retirement communities, despite a slightly higher cost of living. South Dakota: With no state income tax, affordable housing, and a low cost of living, South Dakota continues to be one of the best states for retirees looking for financial stability and outdoor activities. Wyoming: At the top of the list, Wyoming offers retirees a low cost of living, no state income taxes, and affordable housing. Its beautiful natural landscape makes it an attractive destination for retirees seeking both peace and financial stability.
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