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 “Social Security is obsolete and ineffective.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.”

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MARCH 21, 2002

NEWS ANALYSIS By Stephen H. Wildstrom

The Techno-Culture Clash in Telecom

On display at the industry’s big trade show: Tensions between wireless carriers and their hardware and software partners

Software companies run on Internet time. Speed is everything, and if the product that is shipped doesn’t quite work, it can always be fixed in the next release. The handheld-computer industry works on PC time. It’s more important to get the product right out of the box, because hardware is difficult to fix. Time-to-market considerations still dominate the process.

Then there’s the wireless-carrier industry, which works on telephone time. The goal from the get-go is 99.999% reliability, so the rule for both hardware and software is test and test some more, to make sure that products work properly and don’t interfere with the operation of the network. Telephone time is the toughest standard of all.

But a new, carrier-dominated world was very much on display Mar. 18-20 at the Cellular Telecommunications & Internet Assn.’s Wireless 2002 show in Orlando, Fla. Computer-oriented companies such as Hewlett-Packard, Compaq, and Handspring are rolling out devices with built-in support for the new data networks being offered all over the world. At the same time, large-scale wireless-data deployments by corporate customers are taking the voice-oriented carriers into territory they don’t understand very well.

“THOSE FIVE NINES.”  “In the dot-com days, you could talk to an Internet company and have a service up and running in a couple of days,” says Gregg Armstrong, chief operating officer of Starfish Software, a Motorola unit that makes software to synchronize data across multiple devices. “The quality was often not very satisfactory. Now, before the carriers will deploy anything, they want to do extensive testing because they need those five nines of reliability.”

As PC and Internet players move into the world of carriers, they’re being forced to change the way they do business. A device can be used on networks using CDMA technology, such as Sprint and Verizon Wireless, only if it has been “provisioned” by the carrier, so carriers must approve all devices.

Customers of GSM networks, offered by VoiceStream and all European carriers, can, in effect, provision their own devices by moving a little card called a subscriber-information module from one device to another. But a retail model in which carriers are expected to subsidize the cost of phones and handhelds means the network operators are in control of what gets sold.

Hardware makers, who once got products to market as quickly as humanly possible, now face months of negotiation followed by months of testing. Furthermore, says Joe Sipher, vice-president for product marketing at handheld maker Handspring, “carriers want everything on their networks to look as much alike as possible, while hardware makers want to differentiate their products as much as possible.”

BRANDED HANDSETS.  The tension between carriers and their hardware and software partners has as much to do with business models as with technology. It has been the carrier who acquired the customer and the carrier who billed the customer — even for services provided, usually invisibly, by third parties. Some carriers, notably Sprint, have only recently begun to allow hardware makers to put their own brands on handsets.

“At least for the next couple of years, the carriers will continue to own the customers,” says Bruce Chatterly, CEO of Seattle-based ViAir, whose applications help carriers give customers access to Internet and corporate e-mail accounts. But companies with strong brands of their own, like Compaq and Microsoft, want a bigger piece of the action.

One product unveiled at the CTIA show is a good example of the complexity engendered by all the new requirements. Called the Thera by Audiovox, it’s co-branded by Audiovox Communications and Sprint PCS, which will provide both the data network and the sales and marketing force. The connection to the network is provided by a Sierra Wireless radio modem. Yet the Thera itself was designed and manufactured by Toshiba to use Microsoft’s Pocket PC 2002 software platform.

WARY OF REDMOND.  Microsoft probably faces the greatest challenge in this new world. For one thing, carriers have not traditionally been its big customers. They mostly favor Sun Microsystems gear in their data centers, regarding Windows servers as neither secure nor reliable enough to make the cut as “carrier grade.” More important, Microsoft’s reputation as a company that manages to walk away with the lion’s share of the profit in any relationship makes carriers extremely wary of partnering with Redmond.

Microsoft has been making some inroads, mainly with wireless Pocket PC 2002 models. European carrier mmO2 (formerly BT Cellnet) will brand and sell a Pocket PC for use on its GSM network (the hardware comes from HTC in Taiwan). But Microsoft has had a tougher slog getting carriers to embrace its Smart Phone, a smaller unit based on a stripped-down version of Windows CE and intended primarily for voice use. The software marker has finally gotten some carrier deals for the Smart Phone, but it has had to work with a third-tier handset maker, Britain’s Sendo.

The carriers, too, face challenges adapting to the changing market. The more they succeed in being the customers’ single point of contact, the more responsibility they take for customer satisfaction with hardware and software provided by others. But if they don’t supervise the whole package, they may be pushed out to serve as only commodity suppliers of bandwidth. “They run the risk of being reduced to dumb pipes,” says Richard Siber, a partner in Accenture, whose Mobile Service Bureau is a software and services product designed to help carriers manage wireless deployments for enterprise customers.

In the end, the carrier, hardware makers, and software companies will all have to find a way to work as a team. They all need each other now. And, with luck, the wireless-data business will have enough growth so that all can prosper. But look for some interesting clashes in culture along the way.