Sunday Morning Coffee

The Barron's cover story took a stab at Social Security and Medicare. The conclusion seemed to be that in a couple of decades the payouts/expenses will exceed the government's revenue unless something changes soon. There was also a pretty good explanation about how the trust fund is a series of IOUs. The article did not offer much in the way of ideas of what to do so much as seeming to support what the Ryan Plan (as in Paul Ryan from Wisconsin) is supposed to do.

Although I have not read the Ryan Plan there was one detail in Barron's that caught my attention in relating that medicare and medicaid would revert to the states. People would get a voucher that would go toward buying private health insurance which seems fine conceptually but that "its value would increase at the rate of GDP growth plus 1%." Hopefully there is more to it than that but as most of us have experienced firsthand, medical-related expenses go up much faster than that.

There was also some detail about the CBO baseline scenario (where it is assumed everything stays as is) and the alternative fiscal scenario which hopefully would be more realistic although Barron's believes that assumptions of future medical cost inflation is too low.

There was one very funny comment from a reader who noted that his senator believes no major changes are needed to which the reader said that "everyone should move to Pennsylvania because Social Security is safe here." Pretty good stuff.

We've gone over this here before, I believe the obvious is some sort of meaningful change to the program as we know it that will upset a lot of people. I have never thought that those in retirement or on the verge will face meaningful change but that people who are now somewhere between 45 and 55 will. It seems as though the situation is worsening slightly, but continuously as time goes on but that is open to debate as is the whole topic I suppose.

I get pushback on my belief that my wife and I will get nothing, our combined benefit would be a little more than $4500 month if we wait until age 70, but I do expect to get means tested down to zero and think it is prudent to plan accordingly.

Unrelated was an editorial in Barron's about a big evolutionary step in college level education. Read the editorial but basically there is network infrastructure whereby most or maybe all classes could be online and free (or much cheaper as time goes on). For now, completion of courses results in certificates not accreditation but the article says that can change.

The give-up of course is the college experience which has come under a lot of fire in the last few years as simply being too expensive of a tradeoff for the cost involved. While I view my college days as priceless, I only graduated with $3000 in debt (San Diego State was very inexpensive in the mid and late 1980s). Facing tens of thousands in debt for an undergrad degree from someplace that is not Harvard or Stanford should cause people to look for alternatives and the concept laid out in the article seems plausible and it was a fascinating read.