The Social Security Administration (SSA) recently announced that the inflation index it uses to determine cost-of-living adjustments (COLA) has increased over the past year. As a result, Social Security and SSI benefits will both automatically increase by 0.3% in 2017. Here's how the COLA is determined each year, and what it could mean to you in 2017.

How the COLA is determined each year

The short answer is that Social Security cost-of-living adjustments are determined by inflation. If prices increase in a certain year, Social Security benefits (including SSI) are adjusted upward to maintain beneficiaries' purchasing power at a constant level.