A growing number of Americans aged 50 and older are feeling uneasy about their financial security in retirement—particularly when it comes to whether their Social Security benefits will keep pace with inflation. According to a recent AARP survey, nearly 90% of people in this age group—whether already receiving or expecting to receive Social Security—worry that their benefits will not cover the rising cost of living.
The concerns are widespread:
- 40% of future beneficiaries worry a lot.
- 32% worry somewhat.
- Even among current retirees, 34% say they’re highly concerned that inflation will outpace their benefits.
This isn’t just a fear—it’s a reality many are already living. The Employee Benefit Research Institute (EBRI) found that over half of Americans over age 50 are anxious about their retirement security. Alarmingly, 37% reported struggling or expecting to struggle with paying for basic expenses like housing and groceries, largely due to inflation.
The Road Ahead for Baby Boomers
The financial outlook for baby boomers over the next decade presents serious challenges. Many retirees depend primarily on Social Security for their income. However, Social Security typically replaces only about 40% of pre-retirement income. Financial experts recommend at least 70% to maintain a comfortable lifestyle.
According to the National Institute on Retirement Security, 40% of older Americans rely solely on Social Security—a precarious position given today’s inflation and uncertain economic trends.
Smart Tips to Boost Retirement Readiness
To guard against inflation and boost financial stability, consider these strategies:
1. Diversify Income Sources
Include a mix of Social Security, pensions, savings, 401(k)/IRA accounts, and other investments.
2. Invest Wisely
Look into stocks, real estate, or Treasury Inflation-Protected Securities (TIPS)—assets that historically outperform inflation.
3. Maintain a Budget
Track spending and cut non-essentials. Adjust your budget regularly to match inflation and lifestyle changes.
4. Delay Claiming Social Security
If you can, wait until full retirement age—or even age 70—to claim benefits. Each year you delay increases your monthly payment.
Where You Retire Matters: Best States for Tax-Friendly Retirement
Choosing the right state can have a significant impact on your financial well-being—especially when it comes to how Social Security benefits are taxed.
States That Do NOT Tax Social Security Income (38 States + D.C.)
➤ No State Income Tax (Social Security is tax-free too):
- Alaska
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Income Tax States That Exempt Social Security:
- Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa,
- Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Hampshire, New Jersey,
- New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia, West Virginia,
- Wisconsin, and the District of Columbia.
Note: Oregon and West Virginia are phasing out taxes on Social Security for most retirees.
States That May Tax Social Security (Based on Income):
These 11 states tax Social Security benefits only if your income exceeds certain thresholds:
- Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont
Retirement doesn’t have to be a period of financial stress. With smart planning—budgeting, diversifying income, delaying Social Security, and selecting a tax-friendly state—you can improve your odds of maintaining a secure and comfortable retirement.
Inflation and tax policy changes will always be factors, but understanding your options is the first step toward peace of mind.
-Phan Hoàng Anh-
Here are some excellent sources for further reading, offering detailed, up‑to‑date guidance on Social Security taxation, state-level rules, and retirement planning:
In‑Depth Guides on State Taxation of Social Security
- Kiplinger – “States That Tax Social Security Benefits in 2025”: Clearly outlines which nine states tax Social Security based on income thresholds, with helpful income limits and exemptions.
- NerdWallet – “Which States Tax Social Security Benefits?”: Confirms the same nine states and digs into thresholds per state (Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont).
- Investopedia – “States That Don’t Tax Social Security Benefits”: Explains that 41 states and DC exempt Social Security, notes the nine that don’t, and emphasizes West Virginia’s phase-out plan.