Fixed income - meaning of the phrase

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nhrdls
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Fixed income - meaning of the phrase

Post by nhrdls » Fri May 23, 2014 4:33 pm

I had been wondering about the phrase "fixed income" for sometime. Many times this phrase is used to indicate a retired person's income or an income of person who earns less. For example, I heard some story on radio and someone said I can not afford proposed tax because I am on fixed income. While I understand meaning of not able to afford, as it might strain/change your budget, why the words fixed income?

Almost all the salaried people are also on "fixed income" - that is their income does not change from pay check to pay check or at least not significantly. Are these people not on fixed income? Any change in above cases is also going to impact them, but if we assume that those who have jobs are earning better impact of change will be less. Still they are also on fixed income.

Is this just a convention to indicate low levels of income or it has other basis?

Sidney
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Re: Fixed income - meaning of the phrase

Post by Sidney » Fri May 23, 2014 4:35 pm

It is probably a throwback to the days of DB non-cola pensions.
I always wanted to be a procrastinator.

The Wizard
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Re: Fixed income - meaning of the phrase

Post by The Wizard » Fri May 23, 2014 4:42 pm

I've wondered about that as well from time to time.
A fixed income is fine so long as it significantly exceeds your expenses.
So I've come to the conclusion that it's just a polite way of saying "annoyingly LOW income with no reasonable hope of ever increasing"...
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Sidney
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Re: Fixed income - meaning of the phrase

Post by Sidney » Fri May 23, 2014 4:58 pm

also, for many people SS and pension may be everything they have. No "savings" to dip into. Thus "fixed income" = fixed cash flow.
I always wanted to be a procrastinator.

ajcp
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Re: Fixed income - meaning of the phrase

Post by ajcp » Fri May 23, 2014 5:05 pm

I'm with the wizard, when people say fixed income they usually mean low income.

dl7848
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Re: Fixed income - meaning of the phrase

Post by dl7848 » Fri May 23, 2014 10:22 pm

FIxed income is commonly used to mean "bonds" or bond-related investments. Normally, an investor divides their portfolio into equities and fixed income. The fixed income can be plain vanilla bonds on the one end, or high-yield, leveraged instruments pumped up with derivatives on the more sophisticated side. IOW, fixed income doesn't necessarily mean staid and conservative. It can in fact be as profitable as equities.

So that's a different meaning than what's meant by saying that someone is "living on a fixed income". That has the connotations of a coupon clipper.

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joe8d
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Re: Fixed income - meaning of the phrase

Post by joe8d » Fri May 23, 2014 10:42 pm

" Living on Fixed income " means SS,Pension

Fixed Income AA means " Bonds" which would entail all Debt Instruments.
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dickenjb
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Re: Fixed income - meaning of the phrase

Post by dickenjb » Sat May 24, 2014 7:08 am

I think the OP meant to ask about the phrase "living on a fixed income".

My take is that a retired person may be on a corporate pension which is non-COLA'd. Thus he/she gets squeezed as inflation causes the price of goods and services to rise while income remains constant in nominal dollars.

Alternatively, it could be the person is living on SS alone, with no portfolio of investments. Believe it or not, many people allow themselves to retire in that position. Now SS payments are incremented for inflation each year, but an exogenous shock to the budget (such as the tax increase you heard about on the radio show, or an unexpected car repair) throws them into a bad situation. All of their basic expenses (food, medicine, gasoline, utilities) go up each year with the rate of inflation, wiping out the SS increase.

Contrast this with the salaried person, normally raises run a percent or so over the inflation rate and you get the occasional promotion. A large part of your expenses are fixed (mortgage payment) while your salary grows.

22twain
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Re: Fixed income - meaning of the phrase

Post by 22twain » Sat May 24, 2014 7:48 am

Sidney wrote:It is probably a throwback to the days of DB non-cola pensions.
Also, once upon a time, Social Security was not automatically indexed for inflation.
My investing princiPLEs do not include absolutely preserving princiPAL.

dl7848
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Re: Fixed income - meaning of the phrase

Post by dl7848 » Sat May 24, 2014 2:28 pm

As for the connection of fixed income with low income:
CEO pension plans are now worth an average 239 times more than the retirement plans for the employees they supervise, according to data compiled by NerdWallet on the companies with the 10 highest gaps.
These CEO pension values will make your head spin

CEOs also get golden parachutes, golden handcuffs, and other such consideration to help ease the "pain" of their retirement.

ajcp
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Re: Fixed income - meaning of the phrase

Post by ajcp » Sat May 24, 2014 4:30 pm

dl7848 wrote:As for the connection of fixed income with low income:
CEO pension plans are now worth an average 239 times more than the retirement plans for the employees they supervise, according to data compiled by NerdWallet on the companies with the 10 highest gaps.
These CEO pension values will make your head spin

CEOs also get golden parachutes, golden handcuffs, and other such consideration to help ease the "pain" of their retirement.
Fixed income doesn't have to equal low income, but when people say they are on a fixed income, that's usually what they mean. I've never heard a CEO quoted saying "I'm on a fixed income".

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Aptenodytes
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Re: Fixed income - meaning of the phrase

Post by Aptenodytes » Sat May 24, 2014 4:54 pm

ajcp wrote: Fixed income doesn't have to equal low income, but when people say they are on a fixed income, that's usually what they mean. I've never heard a CEO quoted saying "I'm on a fixed income".
Because CEOs aren't on fixed incomes. Regardless of what pension they may have, they surely have nest eggs generating returns.

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cfs
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Re: Fixed income - meaning of the phrase

Post by cfs » Sat May 24, 2014 4:58 pm

In or If

It all depends on market conditions.

Sometimes my fixed INcome looks and feels like fixed IFcome.

Thank you.
~ Member of the Active Retired Force since 2014 ~

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