Retirees in These 5 States Will Get the Biggest Social Security Raise in 2023

For most retirees, Social Security is an indispensable income source. National pollster Gallup found that 89% of current retirees receiving a Social Security check rely on it as a “major” or “minor” source of income.

Meanwhile, the Center on Budget and Policy Priorities estimates that close to 22.5 million people are pulled out of poverty each year, including more than 16 million people aged 65 and over because of Social Security payouts.

No matter how you slice the data, Social Security’s importance to the financial well-being of senior Americans can’t be overstated. That’s why all eyes are on Social Security’s upcoming cost-of-living adjustment (COLA) announcement, which is slated for Oct. 13, 2022 at 08:30 a.m. ET.

Social Security’s cost-of-living adjustment (COLA) will be historically high in 2023
The easiest way to think about Social Security’s COLA is as a “raise” passed along to the program’s more than 48 million beneficiaries most years to account for inflation — i.e., the rising price of goods and services.

The idea behind the COLA is that if the cost to buy a basket of goods rises by “X,” Social Security benefits should also increase by “X” so program recipients, most of whom are senior citizens, can still afford the products and services they need to live comfortably. You’ll note “raise” is in quotation marks to reflect that this benefit increase is to account for inflation and isn’t a true raise as you’d get from an employer.

In 2023, beneficiaries can expect a historic boost to benefits. The COLA calculation only factors in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) readings from the third quarter (July to September). Through the first two months of Q3, Social Security’s cost-of-living adjustment is pacing about an 8.8% increase for the upcoming year.

However, policy analyst Mary Johnson of nonpartisan senior advocacy group The Senior Citizens League (TSCL) estimates recipients can expect an 8.7% “raise” in 2023. This would mark the largest year-over-year percentage “raise” in 41 years and will absolutely be the biggest nominal-dollar boost to Social Security checks in history.

But you might be surprised to learn that monthly payouts, and therefore the expected nominal-dollar boost to Social Security checks, can vary greatly depending on what state you live in.

Retirees in these five states can expect the biggest “raise” in 2023
Every year, the Social Security Administration releases a statistical supplement containing copious amounts of data regarding total benefits paid and where those benefit dollars ended up. Among this data dump are geographic tables outlining how much money was paid to eligible retired workers, their spouses, and their children, for each state.

In other words, if you’re willing to do a little math, you can figure out how much the average retirement benefit is for each state. (Note: The statistical supplement lists total retirement benefits paid but doesn’t break them out individually by retired workers, spouses, or eligible children.)

However, the 2022 statistical supplement fails to account for the 5.9% cost-of-living adjustment passed along this year, and it doesn’t factor in any estimated COLA figures for the upcoming year. I’ve taken the liberty of adding in both the 5.9% COLA for 2022, as well as TSCL’s estimated 8.7% COLA for 2023, into the average monthly payout by state figures.

Next year, retirees in the following five states can expect the biggest nominal-dollar Social Security “raise”:

  1. Connecticut: Average monthly retirement benefit expected to rise by $146.87 to $1,835.06.
  2. New Jersey: Average monthly retirement benefit expected to rise by $146.67 to $1,832.60.
  3. Delaware: Average monthly retirement benefit expected to rise by $144.39 to $1,804.09.
  4. New Hampshire: Average monthly retirement benefit expected to rise by $143.67 to $1,794.99.
  5. Maryland: Average monthly retirement benefit expected to rise by $141.92 to $1,773.25.

An outline of the United States that’s completely filled in by a messy pile of one hundred dollar bills.

Why are average retired worker benefits higher in these five states?
You’re probably wondering why retirees in these five states are pulling in larger average Social Security checks. I can assure you it has nothing to do with any COLA shenanigans. Social Security’s cost-of-living adjustment is passed along equally to all of the program’s 65 million-plus beneficiaries.

The most logical explanation for this average check disparity can be found by looking at median household income by state. Maryland, New Jersey, Connecticut, and New Hampshire are four of the top seven states for median household income in 2022.

To calculate a retired worker’s monthly benefit at full retirement age, the Social Security Administration takes into account their 35 highest-earning, inflation-adjusted years. In other words, the more a worker earns during their decades in the labor force, the higher their potential monthly check during retirement. States with higher average annual incomes should be expected to produce retirees who net larger monthly benefit checks.

Additionally, states with higher median household incomes may allow workers the opportunity to save and invest for their future (depending on the cost of living for a given state) more so than other states. If workers have the time to build up a healthy nest egg prior to retirement, they may be more likely to wait longer before claiming their Social Security benefit.

Since Social Security’s retirement benefit can grow by as much as 8% annually between ages 62 and 70, waiting to claim can be a mechanism that pushes the average Social Security check higher in these five states.

— Sean Williams

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