In the literal sense "retarded" doesn't actually mean stupid. It means slowed down. So used in that context it shouldn't offend anyone. The phrase "when I speak to my foreign friends who are learning English, I make sure I use retarded speech" is an example of such inoffensive use.
That being said, it has indeed been adopted into bullies' vocabulary to become a disparaging word towards people with low mental capacity, which is understandable, but unfortunate.
Is it normal that I get upset when I hear someone use the word "retarded"?
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In the literal sense "retarded" doesn't actually mean stupid. It means slowed down. So used in that context it shouldn't offend anyone. The phrase "when I speak to my foreign friends who are learning English, I make sure I use retarded speech" is an example of such inoffensive use.
That being said, it has indeed been adopted into bullies' vocabulary to become a disparaging word towards people with low mental capacity, which is understandable, but unfortunate.