Social Security 2027: Retirees in these 10 states will see the biggest cost-of-living adjustments - The Independent

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The 3.6 percent Social Security increase in 2027 will lead to big boosts in some states…and not so much in others.

Monthly payments will go up the most for retirees in California - $375.15 on average, according to the most recent state-level benefit data from the Social Security Administration.

The payment boost happens every year and is known as a “cost-of-living adjustment,” or COLA, and is meant to balance out inflation and increasing prices over time.

“Social Security will implement this cost-of-living adjustment for 76 million Americans, giving them greater financial stability,” Social Security Administration Commissioner Frank J. Bisignano said in October.

Delaware will see the second-biggest increase at $335.39, followed by Washington ($334.64), Maryland ($332.54) and Pennsylvania ($327.71).

Montana recipients will see the smallest monthly increase at $297.69, followed by North Dakota ($299.22), New Hampshire ($301.39), Alaska ($302.52) and Wyoming ($305.06).

All but two states - Montana and North Dakota - will see average monthly payments rise by at least $300, according to federal data.

While the 2027 COLA increase will provide a much-needed boost to retirees’ monthly income, experts say it likely won’t be enough for the average Social Security recipient.

“COLAs are designed to keep up with increases in the cost of living as measured by an inflation indicator, but for many retirees Social Security is just one component of retirement income,” David Kassir, managing director of Manna Wealth Management, told The Independent in an email.

The COLA increase’s impact also varies state to state, said Jackson Ruggiero, co-founder of Social Security benefits platform DisabilityGuidance.org.

“Retirees in high-cost states like Hawaii, California, Massachusetts and New York may find that the increase gets absorbed quickly by housing, healthcare and everyday expenses,” Ruggiero said. “Those in lower-cost states like Alabama, Indiana and West Virginia may see their benefits stretch further.”

For example, the average cost of rent, utilities, gas and car insurance in California is $3,389 a month, while the same expenses are $2,057 a month in West Virginia, according to cost-of-living platform DollarMap.

The price of everyday goods and services rises with inflation and remains there even if the inflation rate declines, Ruggiero said.

“Retirees don't experience inflation as a percentage; they experience it at the grocery store, the gas pump and when paying their utility bills,” Ruggiero said. “Even when inflation slows, prices rarely go back down. For someone living on a fixed income, every increase in everyday expenses means less money available for everything else.”

Inflation is a small concern compared to what’s ahead for the country’s retirees. The Social Security system is projected to take a massive hit in 2032.

That year, a key funding source for Social Security payments will run out if the government doesn’t intervene, according to projections. If no intervention takes place, payments may drop by as much as 22 percent. Seniors looking to the future shouldn’t make any drastic changes right now, Kassir said, but it’s time to start thinking about budgeting for the 2032 cut.

“What I tell clients is that it's best to budget assuming a benefit cut is a real possibility, but not a certainty,” he said. “That way, you'll have options down the road if a cut does occur.”

Kassir recommends saving as much as possible, understanding the tax implications of IRA withdrawals that seniors often use to cover retirement expenses, and remaining calm.

“Remember, panic decisions usually end up costing you more in the long run than the proposed cut,” he said.

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