Generation Wrecked

Ten years ago grunge musicians and college-age Cassandras who had never held a day job preached that corporate America would crush their generation's soul and leave them without a pension plan. Films like Singles and Reality Bites chronicled their transition from college graduate to Gap salesclerk.

A few years later the core of Generation X--the 40 million Americans born between 1966 and 1975--found themselves riding the wildest economic bull ever. Salesclerks became programmers; coffee slingers morphed into experts in Java (computerese, that is)--all flush with stock options and eye-popping salaries. Now that the thrill ride is over, Gen X's plight seems particularly bruising. No generation since the Depression has been set up for failure like this. Everything the dot-com boom delivered has been taken away--and then some. Real wages are falling, wealth continues to shift from younger to older, and education costs are surging. Worse yet, for some Gen Xers, their peak earning years are behind them. Buried in college and credit card debt, a lot of them won't be able to catch up as they approach their prime spending years.

FORTUNE recently encountered the bitter and (now) experienced voice of Generation X in a chain restaurant in suburban Dallas. Age 32 and piercing-free, Karen Doss has found out that the alternative rockers were right. To pay for college she worked full-time as a secretary at Pillsbury world headquarters. After graduation in 1993, she accepted her sole job offer as an advertising copywriter, even though she despised the industry. She finally quit last year to get her real estate license so that she could better support her husband while he fulfills his dream of owning a bar.

Halfway to pension age, she has just $5,000 in a 401(k) and $20,000 in home equity. Ideally, someone her age should have at least $100,000 stashed away. "I don't have a corporate pension, and they aren't what they were," she says. "Social Security is obsolete and ineffective. And I already know that I'm going to have to have a private health-care plan. I'm angry that I can't seem to get a break."

Yes, yes, yes, we know what you're thinking. The free-spending slackers have only themselves to blame, since the dot-com boom should have made them rich for life. On the surface that's true. A 30-year-old today is 50% more likely to have a bachelor's degree than his counterpart in 1974 and earns $5,000 more a year, adjusted for inflation. But that's where the good news stops. He also has more in student loans and credit card debt, is less likely to own a home, and is just as likely to be unemployed. His salary probably topped out during the boom, whereas his predecessor's rose throughout his career. Social Security will start to evaporate as he turns 50--or before, if the lockbox gets raided--so he'll have to depend almost completely on his own savings for retirement. The comparison with a 30-year-old in 1984 isn't any rosier.

Gen X "has done worse than their parents have done according to a number of dimensions, like net worth and home ownership," says Edward Wolff, a New York University economist who studies trends in income and wealth. In a recent paper Wolff notes that young households lay claim to a smaller percentage of total U.S. wealth than they did in 1989.

Additionally, the inflation-adjusted median net worth of a Gen X household ($9,000) is lower than that of a comparable household in 1989, according to the Federal Reserve's Survey of Consumer Finances.

Silicon Valley and Manhattan aren't the only stomping grounds for disgruntled young professionals. FORTUNE interviewed more than 50 Gen Xers in Dallas, Louisville, and Seattle, with jobs ranging from construction manager to software engineer (see table). Battered by the economy and the bad luck of being born between Madonna and Britney Spears, they're Generation Wrecked.

The kids who toted STAR WARS lunchboxes are the most highly educated generation in American history: Almost 60% of Gen Xers have some college education, and 6.6% have graduate school degrees. The Census Bureau calls their pursuit of higher education the "Big Payoff," since historically a college-educated full-time worker earns 1.8 times more over his lifetime than a high school graduate.

When you can't find a job or pay your student loans, though, college can seem like the Big Rip-Off. Today, the median student loan debt is at its highest level ever, $17,000, compared with $2,000 when the baby-boomers were in their 20s. According to educational lender Nellie Mae, graduating students average $20,402 in combined student loans and credit card debt. Those who have borrowed to pay for professional school, especially doctors and lawyers, are increasingly likely to have immense debt that is not reflected in proportionately higher salaries. Twenty-eight percent of those surveyed by Nellie Mae had combined undergraduate and graduate student debt of more than $30,000, and for 22%, their loan payments ate up more than one-fifth of their monthly income.

After midnight at a young professionals party in Louisville, Steve Flores, 31, and his wife, Jessica, 32, mingle, while the rest of the revelers line up for last call. Steve is a communications specialist for the party's sponsor, Brown-Forman, the big distiller. While working full-time, he is also pursuing an MBA. Although Steve worked to help pay for college, five years after graduation he has $40,000 of undergraduate debt to pay off; Jessica, an art therapist and professional harpist, has $50,000 in student loans. "I haven't started paying back my student loans for undergrad because they're deferred. I'm not taking any student loans for grad school," Steve says. He isn't so jovial when he thinks about the total tab. "We're dreading the day we actually have to start paying."

Those Big Payoff estimates rely on what 50-year-old college graduates make today to guess what 50-year-olds will make 20 years from now. That's not all that useful. "Whereas their parents experienced rising wages over their lifetime, Generation X may not. So college may have been a bad investment," says Wolff, the NYU economist. Adds Bruce Tulgan, a Gen Xer and founder of RainmakerThinking, a consultancy that studies labor trends: "I had a college president say to me, 'I don't know how much longer I can pull this off because people will start to ask, Is it worth this much money to be that much smarter?' "

A common misconception is that Gen Xers left college to find work in the dot-com go-go years. Not so. In fact, the climate in which they began working--the late '80s and early '90s--was pretty similar to today's: an economic downturn followed by a jobless recovery. Gen Xers managed to survive in that environment by denouncing long-held workplace tenets like corporate loyalty.

It would take a skilled cartographer to map 28-year-old David Li's convoluted dash through org charts at both big and small companies. After college in 1996, Li started out as an analyst for Accenture, worked as a health-care IT consultant for two other firms, and then became CTO of Claimshop.com, a medical claims processor.

Now, unemployed for a year and living in Dallas, Li says, "I'm not really looking for an entry-level position. But I need to realize that the job market now is a lot tighter than it had been when I first graduated from school." He's looking at jobs that pay around $50,000, 40% below the salary he was collecting at Claimshop. "I'm just hoping for something more along the lines of what you would normally expect to see from someone who has been out of school for four to five years."

Li will probably find a job--at 6%, the unemployment rate among Gen Xers is around the national average--but he and others are discovering that previous experience means next to nothing. Jenifer Garcia is temping as a bartender in Seattle after having worked as a hardware tester for Intel, a programmer for MSN, and a manager for Barnes & Noble's online division. Now the 29-year-old is applying for a full-time file clerk position again. "I feel like I'm 18 again, and not in a good way. I've gone through all of my savings and moved back in with my mom."

Even some of Seattle's dot-com winners have been humbled. Across town in a tonier part of Seattle, Rachel Best-Campbell and Alex Campbell bought their $700,000 house with proceeds from Alex's stock options. They sold most of their shares of Cache Flow, now known as Blue Coat Systems, at $96. (The company's stock now trades at $3, after a recent reverse split.) The Campbells' luck dried up in April, when Alex was laid off, rehired as a contractor without benefits, then rehired yet again as a full-time employee but at a lower level.

After months of wondering whether Alex would have a job, Rachel feels no guilt about getting rich during the boom. "Clearly someone out there had $96 to pay for that share of stock, and they wanted it, and they bought it. My dad likes to say, 'My 25-year-old daughter--she's retired now.'"

Those who didn't fulfill their early-retirement dreams in the late '90s are beginning to realize that they may be in the workforce longer than their parents. "You don't find many 65-year-olds working in advertising, so at some point the money must get good enough for people to retire. I don't know," says Luke Blackburn, a 32-year-old senior manager at a Louisville advertising firm. Luke has a house--he used money he received as a gift for a down payment--but little in the way of retirement savings. (Total: $0. He should have $50,000. Although he and Doss are the same age, his savings estimate is less since his living expenses are lower.) "I don't see much future return for investments, either stock or even Social Security benefits. I plan for the kids, but there's not much room for extra." Luke doesn't have a financial planner either. "The brokers only call you if they think you have money," he says. "They started calling me when they saw my job promotion announced in the newspaper."

At least the brokers' attempts aren't laughable. At a recent Department of Labor summit, a group of the country's top economists, politicians, and marketers decided that the best way to get Generation X to plan for retirement was through targeted advertising campaigns. Slogans included "It's your money, it's your choice, and it's your future," "Save for independence day," and "Wazzup." Whatever.

Instead of creating catch phrases, the government should focus on creating retirement options that give Gen Xers --and baby-boomers too, for that matter--the flexibility to withdraw money from their accounts if they're temporarily unemployed, starting a business, or just taking time out, say financial planners. Most important, the retirement accounts need to be portable to match the winding job paths of Gen Xers.

A New York Life Investment Management survey of high-net-worth Gen Xers found that the respondents thought they needed $2 million to retire. Not even close, says Beverly Moore, who conducted the study. A Gen Xer who makes $100,000 and wants to retire at 59 needs $7.3 million net of taxes to sustain that lifestyle. (That means saving $2,600 a month and assumes an 8% return.) The truth of the matter is that very few Gen Xers are saving enough to reach even the $2 million benchmark.

And a return to economic good times doesn't guarantee that most Gen Xers will reach that level. Remember that many of the problems that existed in the early '90s including falling real wages and the slow disappearance of the middle class, weren't erased by the boom. In the case of wages, they only inched up during the dot-com years. (Economists are still trying to figure out why they didn't rise more. One possibility: the influx of skilled foreign labor.) And of the wealth the boom created, the richest households gobbled up a disproportionate amount.

Back in Dallas, Karen Doss says she's angry that she hasn't been able to rely on family, an employer, or the government to help with her future. "The biggest problem with Social Security is that we have no control," she says. "Sure, you can put your money away, but Enron will not go away, and there is going to be another WorldCom. [Corporate America] will still lie and steal our money."

So is Karen prepared? On this subject, she does her best slacker impression. "I can't even tell you how much I have in my 401(k), and I have two of them floating out there with companies. I'm just going to hope it works out at this point. I just wanna die young so I don't have to deal with it."

I was born in '74 and now am a white collar professional. My wife and I both have advanced degrees and we have a very good living. The reason we have a nice living is that our parents taught us to live within our means. I paid for my own college and went to a state school. My wife's parents paid for her college and she went to a private school. The point being is that these people in the article must live within their means. Even though my wife and I make above average wages, she drives a 1993 Nissan and I drive a 1997 Ford. Granted we live in a nice home with a fairly hefty mortgage, but we saved our money to put a large enough down payment that our monthly mortgage would be well within our budget. Finally, as for Social Security we should push our elected leaders to set an end date where my generation would no longer contribute nor recieve benefits. I am planning my future as if Social Security would not exist.

I'm an X-er. My parents are in the generation immediately before the Boomers. I can see the GIGANTIC difference between the way each were raised and how each operate in society. While my sister's family is buying 60" TVs and taking luxurious vacations and purchasing brand new SUVs, I look at my parents. My dad, despite being poor, fatherless, and donating four years to the United States Army, was eventually able to keep the whole family afloat on his salary (and sometimes night jobs). How? Our vacations consisted of car trips. We didn't eat out. We didn't buy calvin klein for a four year old, we bought good, used cars but nothing fancy.

I think there are two things going on broadly with Gen-X's economic security. The middle class is getting screwed and is shrinking. But, we'd be better to emulate the expectations and habits of those who preceded the Boomers.

What a bunch of whiners! Unlike previous generations, Gen X has put off commitment and families in search of job and financial "security." When you hit your mid-30’s, don’t have a solid, committed relationship, no children and the "security" you were searching for is not there…of course you’re in for a big wake-up call.

I’m a Gen Xer (1970) and followed my parents, grandparents and great-grandparents path. I got married at 23, have 2 wonderful children and have my own small business (which has seen its share of good and bad). Unlike my contemporaries, my happiness is not tied to my financial success, but rather to the things that are truly important, like my amazing wife (who is at home with our children – a truly selfless act, especially in today’s climate) and our beautiful children.

I have had my share of financial success and setbacks, but that is part of life. I have a nice house with good equity and a great surround sound system (one of my few toys). My wife has a leased mini-van and I drive a 1990 Toyota Celica that is paid for. Yes, I’d love to be driving a $40,000 car, but sending my children to Catholic school is a priority for me.

Too many Gen-Xers have never had to be responsible for anyone else but themselves, and that is the root of their unhappiness. Yes, having a family can be financially and emotionally taxing, but the rewards of doing it together are what life is all about, and that is what Gen-X has yet to learn. (See, we in CA can still have some perspective =-)

This article paints X'ers with a really BROAD brush and, in my experience as an X'er, is way off base.

Most of my peers in this neck of the woods do a hell of a lot better job of living within their means than their Boomer parents did. I also think that "slacker" tag that got slapped on us awhile back was a load of BS foisted by Boomer-aged movie directors and marketeers looking to cash in. As far as I've heard, X'ers are far more entrepreneurial and fiscally conservative (myself included) than older folks. Oh yeah, we also tend to make the sacrifices necessary to keep a parent at home to properly raise the kids.

As a borderline GenXer ('76) I would like to point out the thing that stands out to ME:

"Whereas their parents experienced rising wages over their lifetime, Generation X may not. So college may have been a bad investment"

AAAAAUUUUUUGGGGGGGGHHHHHHH!!!

By summer of next year I will have five years undergrad, four years grad school with two graduate degrees, and a few dozen thousand in debt accrued. Will I have a job that pays more than 40k a year? Probably not. Does it bother me? For all practical purposes, not particularly... I've been poverty-stricken all my life so it ain't like I'll be cuttin' down on the caviar and SUV purchases or anything...

I'll pay it off eventually, I reckon, if the cigarettes don't kill me off first... Would be nice to look forward to a stable job market in my field... Do I wish I had it to do all over again? Yep. Would've made better choices.

I speculate that's what alot of GenXers are going through these days-- regret...

Unlike my contemporaries, my happiness is not tied to my financial success, but rather to the things that are truly important, like my amazing wife (who is at home with our children – a truly selfless act, especially in today’s climate) and our beautiful children.

Your wife lurks here doesnt she.

Yes, I should have known they would'nt have lived then. The unemployment rate is 6%. I can't imagine my whiney generation getting along with those years where the rate was 18-25%.

The dates for "generations" are a cross between a certain age group of people AND some defining times that seem to influence how they think. Baby boomers are from about 1941 (Pearl Harbor) to about 1963-66 with the death of JFK. since Genxers are right behind them, either Reagan becoming president in 80' or the fall of the Berlin wall in 89' would mark that.

Unless you are going to be an engineer or a doctor or some other highly specialized professional, college is a waste of time for most people. And a "liberal arts" degree isn't even worth the parchment it is printed on. It boggles my mind to see people (and parents) pay as much as $60,000 to obtain a "liberal arts" college degree.

I am steering my sons towards technical schools. These are generally 12-18 month schools that teach you a trade where you can go out and make a good living. Such as computer programming or network administration. But it doesn't have to be high tech either. Plumbers, electricians, mechanics and other tradesmen can command salaries that put most corporate cubicle workers to shame.

My wife and I never went to college. I went to a technical institute to learn electronics and my wife went to a technical institute to learn computer programming. Both schools lasted about a year. We've never had issues making a decent living.

Me in post 2: How many of you know Gen Xers who drive $35K to $40K cars and SUVS because they are the cool car to have. Have all the newest and latest expensive electrical gadgets. Have giant TVs and stereos. Like to take exotic and expensive vacations.

You in post 23: While my sister's family is buying 60" TVs and taking luxurious vacations and purchasing brand new SUVs

I'm learning a very very hard lesson. I'm 28 years old and an unemployed programmer - I peaked at $130K in 2000.

I blew it all - $40K BMW, a pickup truck, a boat, a house, plenty of toys, good times and lots of drugs.

I blew through my pitifull saveings in short order. Now I lost my house, my truck, my boat. I moved in with my younger sister. All I've got is a huge BMW payment to suck up my unemployment, which I have no idea how I'll pay for in a few months.

*sigh*

But I was heading down the wrong path in my life. I found God in all this, hopefully when things turn around I'll be a better and more responsible person for all this misery.

But as of now, I'm still being tought my lesson.

"One of the problems with my generation, the Gen Xer's, is that we were raised with the "me, me, me" and "now, now, now" mentality."

I think you might be the exception rather than the rule. I too am a gen-Xr (between 1966 and 1975) and that was not my experience. Now Gen-Yrs, well, that's another story. Gen-Xrs were not born with cable TV, video games, cd players, computers, fast food delivery, satelite tv, cordless phones (or even tone dial phones), and on and on. Perhaps the difference is my being raised in Texas. Just a thought.

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