(Bloomberg) -- Vera Johnson from Seattle is barely making do, let alone saving for retirement.
I try to remain in the present moment and not live in fear of the future, said Johnson, who has neither retirement savings nor a college fund for her two children. My property is underwater, the properties around me are underwater, Im not building equity in my home.
The 45-year-old almost lost her home to foreclosure in 2010 after the housing-market collapse in the worst recession since World War II. She embodies the financial challenges facing Americas Generation X, those born between the mid-1960s and 1980, which lags behind other generations in building assets.
Good timing is not the age groups forte. Many took out mortgages just before prices plunged, making them the most disadvantaged by the housing crisis, while the 2008 stock-market slump dealt them a further setback. Only one-third of Generation X households have more wealth than their parents, even though most earn more, according to The Pew Charitable Trusts.
When their working years end, Gen-Xers might have to live on just half of their pre-retirement income, compared with 60% for the Baby Boom generation, Pew said last year.
Generation X is at this really critical historical spot, said Diana Elliott, a research officer in financial security and mobility at Pew, a non-profit global research and public policy organization in Washington. They are not doing well relative to the last generation. It should give us concern as a country.
Johnson had trouble making her mortgage payments after the downturn in housing and the recession sent sales plummeting at the nursery business she owns. While she was able to avoid foreclosure on her house after a loan modification, business remains slow and payments are a stretch, leaving nothing extra for saving, she said.
Gen-Xers lost about half of their wealth between 2007 and 2010, according to a Pew Economic Mobility analysis last year. Even before the housing collapse, they were having trouble keeping up with their parents in building assets, according to Pew, which defines Generation X as people born between 1966 and 1975.
The bursting of the dot-com bubble, which culminated in a 67% drop in the Nasdaq Composite Index from 2000 to 2002, was a particularly severe blow to Gen-Xers just starting their careers. While most didnt directly own stocks, the economy slipped into recession and unemployment for 25- to 34-year-olds in 2003 hit its highest level in almost a decade.
Student loans also slowed asset-building, said Singe-Mary McKernan, an economist at the Washington-based Urban Institute.
Under the impact of successive booms and busts, many Xers have struggled to afford a family or keep their home, much less do better than their parents, Neil Howe, co-author with William Strauss of books on generations in American history, said at a May 8 research symposium in St. Louis. Then came the Great Recession, which hit Xers much harder.
The median income for 35- to 44-year-olds dropped 9.1% in the three years ended in 2010, according to the Federal Reserves Survey of Consumer Finances. Incomes of those age 35 or less, including the youngest Gen-Xers and Millennials, fell 10.5%.
While incomes of 35- to 44-year-olds deteriorated less than those of younger Americans, their net worth slumped by 54%, the most for any age group, as the value of stock holdings and properties declined. The median net worth of those younger than 35 declined 25%.
The group aged 35 to 44 fared badly in part because its members had taken on debt to buy real estate at just the wrong moment, said William Emmons, senior economic adviser at the St. Louis Feds Center for Household Financial Stability. Those born from 1978 to 1983, straddling the line between Gen-Xers and Millennials, are at ground zero as the age group hurt most severely by the housing crisis, he said.
'HIT THE HARDEST'
Generation X was hit the hardest, Emmons said. For those families themselves, theres limited time to make up some of those losses. For the economy overall, families that are struggling pretty hard to make up their savings arent spending as much, so thats a drag.
The median value of mortgages and home-equity loans held by 35- to 44-year-olds climbed to $131,000 in 2007 from $85,000 in 1995, based on Survey of Consumer Finances data.
Then property values tumbled during the real-estate crash. For 35- to 44-year-old homeowners, the median value of a primary residence dropped 21% to $170,000 in 2010 from $215,000 three years earlier.
As more decided to rent rather than own after the downturn, theyve missed the subsequent rebound in home prices. About 60.7% of 35- to 44-year-olds owned a home in the first quarter 2014, down from 68.3% in the first quarter 2007, according to Census data.
Gen-Xers were also slammed by the slump in stocks. The 35- to 44-year-old age groups median value of financial assets, including stocks and bonds, dropped 47% to $14,500 in 2010 from 2007. The hit to their portfolios was more than 5 percentage points bigger than for any other age group.
The value of the groups directly held stock portfolios lost 36%, Fed data show. While those who stayed invested in stocks may have recouped losses as the S&P 500 Index has rallied to new highs, only 12% directly held equities in 2010, compared with a 17% share three years earlier.
Whats more, limited improvement in the labor market is making it more difficult to rebuild assets.
It looks pretty bad, said Amir Sufi, an economist at the University of Chicagos Booth School of Business. If you dont have income, you cant build wealth.
As of May, unemployment for 35- to 44-year-olds was 1.8 percentage point higher than in the same month in 2007.
The plight of Gen-Xers also means less support for the economy as they limit spending and concentrate on building up nest eggs, Emmons said.
Matthew Kraft, out of work for about a year, is watching fewer movies at the theater and dining out less. The 39-year-old former public relations manager in New York has filled out more than 110 applications to find something other than entry-level work.
If this keeps going on for another four or five months, its going to start to hurt, said Kraft, whose wife works at a hedge fund. We have been living off of her income and dipping into our savings.
Generation X has already forfeited valuable years of interest compounding by failing to accrue savings early, said Alicia Munnell, the director of the Center for Retirement Research at Boston College and former research director at the Federal Reserve Bank of Boston.
Gen-Xers are going to live longer than the current generation of retirees, and the major source of retirement income is going to be smaller, Munnell said. After 40, if youve put this off, you really have to save at a mind- boggling rate to accumulate enough to retire.
As for Johnson, a mother of a 17-year-old daughter and a 12-year-old son, shes more concerned about day-to-day living than about preparing for retirement.
Her home-loan modification is a Band-Aid for a hemorrhage as her business continues to struggle, she said. Itll seem like its getting better, and then it gets worse.
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