This article takes a look at the 20 states with highest average social security payment. If you wish to skip our detailed analysis on decoding the social security dilemma, you may go to the 5 States with Highest Average Social Security Payment.
Decoding the Social Security Dilemma
Americans may be living longer, but the equation to fund longer retirements remains unchanged. In less than a decade, crucial funds such as Social Security and Medicare are expected to run out. By this time, these funds will be able to pay 80% of benefits only. As a result of this fear, many Americans are planning to tap their benefits earlier than they should, even if it means giving up nearly $200,000 in the process.
According to the 2023 Schroders U.S. Retirement Survey, only 10% of Americans plan to wait until 70 to start claiming their social security checks. Meanwhile, 40% of people who aren’t retired yet plan on claiming their benefits between the ages 62 to 65.
“The choice to forgo larger Social Security payments is a deliberate one, as 72% of non-retired investors – and 95% of non-retired ages 60-65 – are aware that waiting longer earns higher payments.”
-Schroders, an Asset Management Company
Even though potential retirees are giving up a significant portion of their earnings by claiming their benefits early, BlackRock, Inc. (NYSE:BLK)’s Read on Retirement survey states that only 21% of workplace savers are confident in having enough money that can last them through retirement. Struggling with longevity and risks of inflation, it is only but obvious that potential retirees live with this fear. For those already on social security, the 2024 COLA doesn’t look like a big enough raise anyway. However, The Charles Schwab Corporation (NYSE:SCHW) asserts that this only means that inflation is cooling off, and given that inflation continues to ease, retirees get to keep the higher benefits.
“Social Security benefits generally do keep up with inflation, though there is a lag… At the same time, the average retiree’s expenses generally shrink over time, which can complement those higher benefits.”
– Rob Williams, managing director for financial planning, retirement income, and wealth management at The Charles Schwab Corporation (NYSE:SCHW) Center for Financial Research.
Even though funds are expected to deplete, organizations such as BlackRock, Inc. (NYSE:BLK) and The Charles Schwab Corporation (NYSE:SCHW) still recommend waiting until the Full Retirement Age. On trying 100,000 different variations to come up with the best-case scenario for the average worker, BlackRock, Inc. (NYSE:BLK) has discovered that adding guaranteed income and delaying social security benefits until the age 67 is the best thing a worker can do.
Besides delaying social security benefits and working longer than planned, potential retirees can do one more thing that might help them get fatter checks in retirement. According to the Social Security Administration, if an individual retires at the age of 70 in 2023, they can get a maximum benefit of $4,555. Apart from waiting until 70, the individual would have to earn the maximum taxable amount for at least 35 years, which is $160,200 for 2023.
In conclusion, it is safe to say that states with high-paying jobs and thriving industries are more likely to receive the fattest social security checks. While other factors are also at play that determine the highest paying state for social security, such as how long its residents delay social security, if high-income earners have moved to that state for retirement, and more such causes, it is very likely that thriving and high-paying states receive one of the highest average social security payments.
A close-up view of a hand writing out checks from a company checkbook.
Methodology
To determine the states with the highest average social security payments, we have used data from the Social Security Administration’s Annual Statistical Supplement 2023. The geographic data was used to extract the estimated total social security payments by state and the total number of retired workers in each state, as of 2022. Next, we divided the total benefits by number of retired workers to get the average annual payout of retired workers in each state.
We calculated the monthly average by dividing the figures by 12 and then applied an 8.7% Cost of Living Adjustment (COLA) to identify the state with the highest SSI payment in 2023. States have been ranked based on their average social security checks in ascending order from the lowest to the highest.
Here are the 20 states with highest average social security payments:
20. Vermont
Estimated Total Annual Benefits Paid: $2,384 (million)
Number of Retired Workers: 120,203
Average Social Security Check: $1,796.55/month
In the state of Vermont, $1,796.55 is the amount that an average person gets on Social Security per month. Even though Vermont makes it to our list of states with the highest average social security payments, it is not a tax-friendly state for retirees. Most forms of retirement income are taxed at rates ranging from 3.35% to 8.75%, including social security.
19. Illinois
Estimated Total Annual Benefits Paid: $34,035 (million)
Number of Retired Workers: 1,713,244
Average Social Security Check: $1,799.51/month
Illinois is a nice place to retire considering it receives one of the highest average SSI payments and also because it is tax–friendly towards its retirees. The state has also made it to our list of states that don’t tax social security or retirement income. However, property and sales taxes are some of the highest in the country.
18. Arizona
Estimated Total Annual Benefits Paid: $22,595 (million)
Number of Retired Workers: 1,135,622
Average Social Security Check: $1,802.30/month
Next on our list is Arizona, where the average social security check is $1,802.30 per month. Overall, it is a moderately tax-friendly state for retirees. Social security benefits aren’t taxed here, but other types of retirement income are taxed.
17. Colorado
Estimated Total Annual Benefits Paid: $14,575 (million)
Number of Retired Workers: 732,528
Average Social Security Check: $1,802.32/month
Colorado is a tax-friendly state to retire to. Residents receive large deductions on all types of retirement income, including social security. The average social security check that a retired individual receives in this state is $1,802 per month.
16. Rhode Island
Estimated Total Annual Benefits Paid: $3,434 (million)
Number of Retired Workers: 172,134
Average Social Security Check: $1,807.10/month
Some of the highest average social security payments are received in the state of Rhode Island. The average social security check is $1,807 per month. Regardless, Rhode Island is not a tax-friendly state to retire to. All sorts of retirement income, including social security, are taxed here.
15. New York
Estimated Total Annual Benefits Paid: $55,220 (million)
Number of Retired Workers: 2,745,712
Average Social Security Check: $1,821.75/month
It isn’t a shock that the thriving state of New York has made it to our list, considering it has one of the highest average salaries in the US. The average social security check in the state is $1,821 per month. New York is also moderately tax-friendly towards retirees.
14. Indiana
Estimated Total Annual Benefits Paid: $20,326 (million)
Number of Retired Workers: 1,010,170
Average Social Security Check: $1,822.66/month
Indiana is another moderately tax-friendly state to retire to. The average social security check in this state is $1,822.66 per month. Social Security benefits are not taxed in this state. However, income from pensions and retirement savings accounts are taxed.
13. Virginia
Estimated Total Annual Benefits Paid: $24,365 (million)
Number of Retired Workers: 1,207,649
Average Social Security Check: $1,827.60/month
The state of Virginia doesn’t tax social security benefits, and the average social security check a retired individual receives in the state amounts to $1,827.60 per month. Pension income and retirement account withdrawals are taxed partially.
12. Kansas
Estimated Total Annual Benefits Paid: $8,776 (million)
Number of Retired Workers: 434,744
Average Social Security Check: $1,828.57/month
Seniors having an Adjusted Gross Income (AGI) of $75,000 or less are exempt from taxation on their social security checks at the state level in Kansas. As such, the average social security check that they receive in this state is $1,828.57 per month.
11. Pennsylvania
Estimated Total Annual Benefits Paid: $43,164 (million)
Number of Retired Workers: 2,135,246
Average Social Security Check: $1,831.14/month
Pennsylvania may be one of the best states to live on social security, considering it is tax-friendly towards retirees and also boasts a low cost of living. The average social security check that a retired individual receives per month is $1,831.14. The state doesn’t tax social security checks or income from retirement accounts.
10. Massachusetts
Estimated Total Annual Benefits Paid: $19,641 (million)
Number of Retired Workers: 966,118
Average Social Security Check: $1,841.54/month
A retiree in the state of Massachusetts gets an average social security check amounting to $1,841.54 per month. All social security retirement benefits are fully exempt from taxation in this state, and so are other forms of retirement income.
9. Minnesota
Estimated Total Annual Benefits Paid: $17,442 (million)
Number of Retired Workers: 856,950
Average Social Security Check: $1,843.70/month
Minnesota is another one of the states with the highest average social security payments. Social Security benefits and most forms of retirement income are taxed in this state. Sales taxes are high, while property taxes are close to the national average.
8. Utah
Estimated Total Annual Benefits Paid: $6,764 (million)
Number of Retired Workers: 330,823
Average Social Security Check: $1,852.06/month
In Utah, the average social security check is $1,852.06 per month. There are 330,823 retired workers in the state who were paid a total of $6.764 billion in social security checks as of 2022. This state is moderately tax-friendly towards retirees. Retirement income, including social security, is taxed here. However, a small credit can be claimed against them.
7. Michigan
Estimated Total Annual Benefits Paid: $33,618 (million)
Number of Retired Workers: 1,638,924
Average Social Security Check: $1,858.07/month
One of the states with the highest average social security payment is Michigan, where a retired individual receives a monthly average of $1,858. The state is tax-friendly toward retirees. It doesn’t tax Social Security retirement benefits. Moreover, there are deductions for other types of retirement income. Property taxes are high in this state, but sales taxes are moderate.
6. Washington
Estimated Total Annual Benefits Paid: $22,668 (million)
Number of Retired Workers: 1,098,757
Average Social Security Check: $1,868.79/month
One of the highest-paying states for Social Security is Washington. The average social security check that a retired individual receives in this state is $1,868.79 per month. There is no income tax in the state, which means that all sorts of retirement income are exempt from taxes at the state level. Sales taxes are quite high here, while property taxes are moderate.
Click to continue reading and see the 5 States with Highest Average Social Security Payment.
Suggested Articles:
- 15 States That Do Not Tax Social Security or Retirement Income
- 15 Worst States to Retire on Social Security
- 20 States with the Lowest Average Home Prices
Disclosure: none. 20 States with Highest Average Social Security Payment is originally published on Insider Monkey.
Hedge Fund Resource Center