Today's blog is directed at my fellow baby boomers. I recently was talking with someone in Generation X and they mentioned that they had just talked with a financial adviser about setting up a college savings and a retirement plan. What they learned was that they would have to put $600 a month into a college savings account for each child to be able to afford the tuition cost of a private college in 15 years. The shortened time frame for college required a greater contribution each month than their retirement accounts. However even with the longer time frame for retirement the total of $2,000 a month to fund both their college saving accounts and retirement accounts left them unsure how they could manage both expenses that almost equaled their mortgage payment.
This caused me to think about how the times have changed since I was in the situation that the younger generation now faces. When I was facing my own college costs I was fortunate enough to have a support state that appropriated scholarship funds for any state resident who maintained a "B" average in college. You didn't even have to attend a college in state. With this funding and attending a small college I was able to leave college almost debt free.
Entering the workforce coming out of college many private employers and almost all public employers offered generous pension plans that rewarded long term employment with a comfortable retirement check to supplement Social Security benefits and whatever else you would be able to save and invest. Today most private employers and many public employers have gone to 401K plans with matching contributions. Employee contributions are usually voluntary and many young people opt to make very small contributions to these plans. Not making significant employee contributions is understandable when you look at the college debt that many young people are paying today but it will be shortsighted as the move into middle age and learn how much they will have to contribute to make up for their late start. This is further problematic at a time when they are going to be looking at their children starting college and determining how they will afford that expense.
The last area of challenges faced by today's younger generation is the cost of health care coverage. Once again I was fortunate to have always had generous employer provided health care coverage that covered my families medical care. Some years this expense would have been very difficult with some of the plans being offered today by employers. The plans today have much less coverage and come with very high deductible amounts to be first paid by the employees. It is not hard to find some plans with $5,000 deductibles before they are going to paid anything for the employees health care. With the rapidly increasing cost of providing comprehensive, affordable health care insurance it is not hard to understand why employers have gone to these types of plans.
At the heart of this discussion of the changing situations faced by today's generation is the reality that at a time when employers have severely cut back on employee benefits the public sector has also reduced its funding for benefits that once were thought of as an investment in the future. Public funding to have an educated population and healthy families are now seen as too expensive in a time of fiscal restraint. However just as the shortsightedness of individuals to not save and invest in their futures the reluctance of our legislators to be willing to raise the revenue to support programs that have a public good will also have a price to be paid in the future well being of our younger generations. According to one report by the Urban Institute:
"According to recent estimates published by the Urban Institute, the average American older than 65 now receives $6.66 in federal outlays for every $1.00 received by a child under age 19. Moreover, an overwhelming share of the spending on the aged is determined by benefit formulas that boost spending per person in line with increases in the cost of living or medical prices. Because medical costs have risen without interruption in recent decades and the share of the population past age 65 is increasing steadily, child advocates fear that kids' programs will become orphans in a storm. Government spending on children will inevitably be squeezed as more public resources are diverted to fund programs for the elderly."
I am not proposing that we under fund the programs that support the needs of senior citizens but I would like to take a page from our rationale for defense spending. Know how the defense budget rationale developed during the Cold War has always based funding to be adequate to fund two separate military conflicts? Maybe we could use some of the funding in those areas to fund adequately the needs of both our young and our old? Seems to me to have more logic to secure our future than the to fund an outdated Cold War mentality. Next time you hear a candidate or an elected official say that our youth are our future ask them what programs they support to make that a reality.
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