Inflation has most cruelly hurt the older half of the American community -- those people saving for retirement or trying to live on savings supplemented by Social Security.

Social Security rises with the cost of living. But we were never expected to retire on our government checks alone. The whole retirement-income system assumes that workers will provide the extra comforts for themselves -- a dubious assumption, in today's high-inflation economy.

The central question, then, is what to do with any savings you accumulate, so as not to fall behind the cost of living.

People are quite naturally reluctant to speculate with whatever fixed sum they depend on for support. Yet traditional bonds, annuities and long-term savings accounts have continually lost ground to inflation.

A study of Treasury bond returns, by Lawrence Fisher of Rutgers University and James H. Lorie of the University of Chicago, shows that real returns from intermediate and long-term bonds have fallen behind inflation ever since World War II. This is true for all investors, whether you're in a high tax bracket or a low one, or whether you're buying through a tax-deferred pension fund, Keogh plan or Individual Retirement Account.

What's desperately needed today is a fixed-return retirement investment, indexed in some way to inflation. Even if it failed to yield a real return above inflation, it should at least preserve the purchasing power of all the dollars deposited.

Some insurance companies tried this concept in the 1950s by offering annuity savings plans (variable annuities) pegged to the performance of common stocks. At the time, it was thought that stock prices would, on average, increase at the same rate as inflation.

That was fine for the Fifties. But since the middle 1960s, that theory has gone down the drain. A member of the College Retirement Equities Fund, retiring in 1967 on $609.76 a month, would have seen his pension decline to $444.72 by 1978. And worse, those dollars carried a purchasing power (by 1967 standards) of only $226.56.

It is perfectly possible that stock market trends will reverse themselves in the 1980s and 1990s, and once again turn stock-indexed annuities into an inflaton hedge. But at the moment, that's nothing to count on.

Professor Zvi Bodie of Boston University has come up with a pension plan suggestion, based on price studies of short-term Treasury bills.

Between 1953 and 1972, 30-day Treasury bills averaged a real return (after inflation) of one percent. Since 1973, returns have fallen an average of 1.6 percent behind -- but that's still far better than the yield on long-term bonds or standard annuities.

Bodie proposes that insurance companies consider the possibility of a "purchasing power annuity," invested principally in short-term Treasury bills. Yields could be improved -- and perhaps kept even with 1970s-style inflation -- by diversifying into top-quality commercial paper (issued by big corporations) and bank certificates of deposit -- both of which carry higher interest rates than Treasuries.

For the insurance company with competent investment help, these basic investments might be hedged with a modest portfolio of commodities. His studies of the commodities markets since 1953 show that commodity futues contracts -- bought for three months and then liquidated -- produced an average annual return of 6 percent above inflation.

Bodie thinks that corporations, too, should set up purchasing-power pensions, backed by a revolving fund of short-term investments.

These ideas are still off in the fuature. But many individuals can, today, put together a version of the purchasing power annuity for themselves.

You can do so if you are eligible for a Koegh plan (for the self-employed), an Individual Retirement Account (for people not covered by a company pension plan) or a pension plan from your own corporation. Simply keep the money you contribute to these plans in a money-market mutual fund, which invests in precisely the type of securities found by Bodie to hold even with inflation.

There is generally no sales charge for investing in a money fund. For a list of money-market funds, write to the Investment Company Institute, 1775 K St. NW, Washington, D.C. 20006