California Tuition Protests and Retirement

An event in the news this past week was the tuition fee hike in California Universities. The Youtube title and address is below:

UC Davis Students Protest Fee Hike
http://www.youtube.com/watch?v=yWBa20tygk0

Tuition was raised by about 30% for in-state tuition to about $10,000/year for California State Universites. This increase created a tremendous amount of protest by students as well as teachers. Look at the youtube clip for yourself to get the sense of injustice felt by the people impacted by this decision.

My thought was these protestors are out of touch with reality. Their state is on the verge of bankruptcy paying state workers with IOUs and having emergency sessions on how to balance the budget. If you have to pay someone with an IOU things are pretty bad. Then it struck me that the same thing is going to happen to retirees in the future.

How did California get in this mess? Years ago it use to be that tuition was free for in-state tuition so it became an unrealistic expectation, a right perhaps. Unfortunately, the state went into an economic downward spiral of raising taxes and losing jobs with raising of taxes and losing jobs and the cycle continued. Eventually, reality sets in and the party ends. The bottom line is that many people did not prepare.

Why is this important for retirement planning? Because we as a country are in the same position as California with budget problems, raising taxes, and losing jobs to other countries. The people who will be protesting will be us in the future who are receiving Social Security benefits and Medicare benefits. It is inevitable that benefits will be cut to a level that is inconceivable by economically justified.

Given that neither political party, Republican or Democrat, has stepped up the plate in the last 10 years to solve the problem it is very unlikely that we will avoid this fate. We continue to have more people retire with people living longer and the ratio of the number of people paying into the system relative to the number of recipients continue to decline. Regardless if the Health Care Bill passes or not Medicare benefits are going to be reduced. AARP is in support of the new Health Care Bill so that the organization can sell more Medigap policies, a business decision good for the organization.

What can you do about it? You can prepare and be ready for retirement and you can encourage people who you care about to get prepared. Everyone needs to have a retirement plan.