X - Generation
By Noshua Watson (Fortune.com 10-04-2002)
Ten years ago grunge musicians and college-age Cassandras who had never held
a day job preached that corporate
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
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 "Social Security is obsolete and ineffective.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
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
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
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
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
Even some of
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
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
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
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."