Diane Swonk Calls Inflation the Most Regressive Tax. Retirees on Fixed Incomes Feel It First

Diane Swonk, chief economist at the audit, tax and advisory firm KPMG, summed up this year’s inflation fight in one line on the Marketplace Morning Report episode The Toll of Stubborn Inflation, which aired November 13, 2026: “Inflation is among the most regressive of taxes, hitting those who can afford it least the hardest.”

Swonk was talking about pay earners. The point lands harder on retirees. A worker can push for a raise or pick up extra shifts. A retiree living on Social Security and a fixed pension gets one adjustment a year, and the formula behind it tracks how someone else spends.

Swonk Is Right, and Retirees Pay a Higher Rate

“The inflation rate for wage earners is much higher than that for affluent households. They have to spend on necessities, and those things have gone up much more rapidly,” she said. Retirees sit at the far end of that spectrum. Housing, food, insurance and medical care take up most of a fixed budget, and none of it is easy to cut.

Headline consumer prices rose 3.7% in the year through September 2026. The October index reached 337.511, its highest level in nearly three years. Over that same period, retirees collected a 2.8% cost-of-living adjustment for 2026. The gap functions as Swonk’s tax, collected monthly.

Retiree budgets also differ. The government’s research index for Americans 62 and older weights housing and medical care^[1] more heavily. That index reached 368.8 in October 2026^[1]. Yet the COLA is set by CPI-W, a wage-earner index that was at 331.1 in October^[2]. No benefit is linked to the retiree index.

Medicare Ate a Third of Last Year’s Raise

The average retired worker’s Social Security check is $2,095^[3] a month before the newest COLA. Working backward, the 2026 raise was worth about $57 a month.

The standard Medicare Part B premium then rose from $185 to $202.90^[4]. That premium comes straight out of the check. The $17.90 increase took about 31% of the raise before the retiree bought a single grocery item (we detailed the full set of Medicare surcharges and IRMAA traps in a free guide here).

A 3.6%^[3] COLA for 2027 lifts the average check to $2,170, a $75 monthly gain. That helps going forward. Swonk explained why it still falls short: “Even once we reach what the Federal Reserve considers price stability, it still takes time for consumers to recover all the ground that they have lost relative to inflation.” A COLA resets the benefit level. Every month spent trailing prices stays lost.

One Number Decides How Hard This Hits You

The variable that matters is the share of your income that adjusts for inflation. Social Security adjusts, with a lag. A pension without a COLA, a fixed annuity, or a bond coupon remains frozen.

For example, a $1,500 monthly pension with no inflation adjustment starting in January 2024. Consumer prices rose about 9% from then through October 2026. That check now buys what $1,371 bought when it started.

The retiree lost roughly $129 a month, or about $1,552 a year, in under three years. No statement shows that loss. A retiree living entirely on Social Security got partial catch-up through the COLA. A retiree with half of their income in a frozen pension absorbs the full hit on that half.

Relief may take a while. CNBC reported that October consumer prices rose more than expected, and Reuters reported on Goldman Sachs (NYSE:GS | GS Price Prediction) after the data: Goldman Sachs added another Fed rate hike to its outlook.

Five Moves to Shrink Your Inflation Tax

1. Calculate your indexed share. List every income source and mark whether it adjusts for inflation. A higher frozen share means you need a bigger buffer elsewhere.
2. Track your personal inflation rate. Compare 12 months of spending on housing, food, insurance, and medical care with the prior year. Then measure that growth against the 2027 COLA of 3.6%^[3].
3. Audit your fixed-income holdings. Subtract recent inflation of about 3.7% from the yield on each bond, CD, or annuity. A negative result means that holding is losing purchasing power every year.
4. Research inflation-protected options. Treasury Inflation-Protected Securities and Series I savings bonds tie their returns to consumer prices. Compare those terms with your current fixed holdings before you reinvest maturing money.
5. Manage your Medicare bracket. In 2026, Part B surcharges start above $109,000^[4] for single filers. Crossing that line raises the premium to $284.10^[4] a month. Medicare uses income from two years earlier, so plan large IRA withdrawals ahead of time.

Inflation takes the most from the income that cannot adjust, so find out how much of yours is frozen and start there.

Contact [email protected] for any questions or corrections.