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Photograph by Bruce Laurance/Getty Images Photograph by Bruce Laurance/Getty Images

Thanks to the brutal combination of the recent recession and boomer demographics, the words “retirement” and “penury” are practically synonymous. The oldest members of the massive Baby Boom generation became eligible for Social Security during the housing bust and global credit crunch of 2008. Talk about bad timing. Boomers nearing the traditional retirement years watched their investments plunge in value. Morbid jokes about 201(k)s were told in bars and offices across the country. Jeremiads about boomers and retirement became a staple of think tank reports and Op-Ed pages.

Yet the financial foundation of leading-edge boomers looks stronger in the aggregate than commonly assumed, and it’s likely to improve in coming years. A better grasp of boomer finances lets us see how a majority of boomers can improve their own circumstances when it comes to retirement—and where policy makers should take a stand to help out the most vulnerable.

Take the scholarly study ( PDF), “How Did the Recession of 2007-2009 Affect the Wealth and Retirement of the Near Retirement Age Population in the Health and Retirement Study?” The inflation–adjusted wealth of people nearing retirement—those ages 53 to 58 in 2006—declined overall by a modest 2.8 percent by 2010, calculates economist Alan Gustman of Dartmouth University, Thomas Steinmeier, economist at Texas Tech University, and Nahid Tabatabai, research associate at Dartmouth. The change in the wealth of median households was 4.3 percent—from $649,000 to $621,000. “We thought the early boomers would be an enormously vulnerable group,” says Gustman. “So we looked back and the answer was: not much happened.”

The more modest wealth reduction becomes apparent when a broad financial picture of the group nearing retirement is drawn. Their figures include the present value of projected lifetime Social Security benefits; defined benefit pensions and defined contribution plans such as the 401(k); the value of a primary home, net of mortgage debt; the worth of other real estate, mostly vacation homes; business assets; vehicles; financial assets such as stock holdings; and IRAs. (The researchers excluded the top 1 percent and bottom 1 percent of households.) Among the intriguing findings is how early boomer homeowners in their database had sufficient equity in their homes so that a mere 5 percent fell into negative housing wealth after the housing bubble burst.

Although this is one study, however carefully constructed, the results reflect comparable insights from other academic studies. Barbara Butrica and Karen Smith, research associates at the Urban Institute, and Howard Iams, senior research adviser to the Social Security Administration, examined how retirement income at age 67 ( PDF) is likely to change for boomers and generation X. Their model takes into account projections of Social Security benefits, pension income, asset income, marital changes, health status, and the like. The authors look at the replacement rate—how much of their preretirement income retired households replace. They estimate the share of early boomer households replacing less than 100 percent of preretirement income at 57 percent. Not good. However, most experts assume retirees need only 75 percent to 85 percent of that income to maintain their standard of living before retirement. By this metric, the share drops from 57 percent to 39 percent. Better.

The wealth of leading-edge boomers should also enjoy welcome tailwinds over the next several years. Retirement account balances at the end of 2012, at $9.5 trillion, were 9 percent above their peak value in 2001, although down 1 percent when adjusted for inflation, according to the Urban Institute. The stronger stock market is likely to boost those values. Home property values are on the mend, with sales up and inventories down. The median price of existing homes in January was $173,600, up 12.3 percent from the same time last year. The labor market is improving.

Put it this way: A majority of boomers seem to be on a reasonable path toward retirement. Yes, many—perhaps a third—will find that it pays to earn a paycheck for a few extra years, hardly an unrealistic expectation considering today’s 65-year-old has the same mortality and health as a 54-year-old did in 1947. The combination of accumulated wealth, additional savings, and working longer means many leading-edge boomers, as well as the younger members of the generation following them, won’t retire penniless. The future is brighter than the searing experience of recent years would suggest.

Not for everybody, though. A group of aging boomers is vulnerable in our increasingly unequal society. High school dropouts. High school-only graduates. Single moms. African-Americans. People who worked in low-wage jobs without benefits. “It’s also a well-established fact that the individuals most at risk in retirement are those who have an economically difficult working life—namely, households with very low incomes,” writes Steve Utkus, head of the Vanguard Center for Retirement Research, on his blog.

Social Security is the pension plan for this group. Social Security benefits accounted for 30.2 percent of total wealth among early boomers in 2010, but 79 percent for those in the bottom fourth of wealth. In this era of worry about the federal government’s debt and deficit, everyone should be wary of calls for cutting Social Security benefits by, say, raising the age of filing for full benefits or reducing the annual cost of living adjustment with a different cost-of-living index. There are plenty of other places to look for government savings than lowering future living standards for our most vulnerable citizens.