Opinion: Retirees in the U.S. do not live on 'fixed incomes' - MarketWatchAs inflation has gained traction in the last year, commentators constantly remark about how it is particularly hard on retirees who live on a “fixed income.”

Please stop. Retirees do not live on fixed incomes. The 60% of households in the lower portion of the income distribution receive the bulk of their retirement income from Social Security (see Table 1). Social Security adjusts benefits each year to reflect changes in the Consumer Price Index.

The automatic increase in monthly benefits in response to inflation is a wonderful aspect of the Social Security program.

It ensures that retirees do not lose purchasing power as inflation rises. The most recent adjustment increased monthly benefits by 5.9%. Since the cost-of-living adjustment (COLA) first affects benefits paid after Jan. 1, Social Security needs to have figures available before the end of the year, and thus uses inflation numbers from the third quarter of the preceding two years to calculate the adjustment.

That is, the adjustment for Jan. 1, 2022 is based on the increase in the CPI from the third quarter of 2020 to the third quarter of 2021.

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