“Tell me again how good we have it, Dad?”

Posted On July 21, 2015

If you feel like you’re making more but have less, you might be Generation X.

According to this report from Stony Brook assistant professor of finance Noah Smith, writing for Bloomberg View, the Pew Charitable Trusts tracked Generation X households like mine and found that we typically make about $12,000 more than our parents at the same age, adjusting for inflation and household size. That’s the good news.

Now for the bad: Less than half the Gen Xers in every income bracket are wealthier than their parents at the same age.

Part of that, of course, is that we’re spending more and saving less. We go on vacations when our parents stayed home. We buy gadgets that weren’t invented when our parents were our age, and in two years they’re outdated and we buy new ones.

But it’s not just wanton consumerism that’s to blame. Many of us also are saddled with paying back student loans that our parents didn’t have. The continued rise of college tuition likely means that we’ll be writing this same blog about millennials in a few years when compared to Generation X.

In fact, the Pew report found that Gen Xers decline in wealth compared to their parents is sharper for high earners than those who earn less. That’s because high-salary Gen Xers are more likely to have more student debt and to have started their careers later.

The market has also played a role, as the gains of the 1980s and ‘90s were reversed in later decades. Smith notes that the real annualized return of the Standard & Poor’s 500 Index dropped from 15.4 percent a year between 1985 and 2000 to 1.9 percent a year between 2000 and 2014.

While the Pew report only goes up to 2011, excluding stronger market returns from 2012 to 2014, Smith notes that unusually high stock valuations are likely to result in flatter returns over the next couple of decades.

So we’ve paid more – and are in many cases still paying more – for our educations and we’re getting smaller returns for our investments. Tell us again how good we’ve got it, Dad?

All of this means that we, the so-called Slacker generation, are going to have to be more aggressive, more disciplined and more creative in our saving than our parents were. But there’s still student debt to repay, the kids still want to go to Disney World, and the iphone 7 can’t be that far away.

Categories: Education, Financial Services, Generation X, Work