Each year, the Social Security Administration enacts a cost-of-living adjustment (COLA) meant to keep benefits in line with inflation. Not surprisingly, high inflation in 2021 led to a massive 5.9% COLA in 2022, but inflation has continued to accelerate this year, which means seniors may see a bigger raise next year.

In fact, The Senior Citizens League says the COLA may clock in at 8.7% in 2023. That would be the largest increase in benefits in the last four decades. But seniors must be aware of a few important caveats.

Social Security was first subject to federal income tax in 1984, though less than 10% of seniors actually had to pay taxes on benefits at the time, simply because most fell short of the income thresholds. However, those thresholds have never been adjusted for inflation, and that has created a problem.

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Source Fool.com