Female boomers broke the mold when it came to working outside the house and establishing successful careers.

The first boomer to file for Social Security last year was a woman, and according to a survey by the Urban Institute, between 1975 and 2007, the number of working women ages 25 to 54 increased to 76% from 55%. More than 60% of boomer women will qualify for Social Security retirement benefits based on their own earnings, and only one in 10 will likely rely solely on spouse or survivor benefits.

Men and women approach retirement differently: from how they save, to spending plans and what they expect out of their golden years, there are major difference between the genders.

I had a chance to speak with Richard Johnson, director of the Program on Retirement Policy at the Urban Institute regarding boomer women in or nearing retirement, and he offered the following

Boomer: How will boomer women’s retirement income compare to that of previous generations?

Johnson: Many boomers are understandably worried about their upcoming retirement. With traditional pensions disappearing, many boomers will be relying on not-fully funded 401(k) plans that took a massive hit in the recent volatile stock market.

Retirement security is especially precarious for older women. Because women tend to have worked and earned less than men, they accumulate fewer Social Security and pension benefits in their own names and are less able to save in other ways. Their husbands’ benefits can prop up their retirement incomes, but they lose much of that support if their husband dies or if they divorce. As a result, data shows widowed, divorced, and never-married older women are more than twice as likely to live in poverty as older men.

Despite all this, there is some encouraging news. Average earnings have increased, even though the median has not, which increases everyone’s Social Security because of how the benefit formula is calculated. The boomer generation is healthier than past generations enabling to work longer, and they are much better educated than their parents and grandparents.

Many boomers benefited from the run-up in the stock market and housing values during the 1990s and the late 1980s, so many still have substantial wealth despite the recent market crashes. And probably most importantly, boomer women have worked and earned more than ever before, partly offsetting the declining labor market fortunes for men.

How will all this play out for boomer women? Our projections reveal some interesting trends. Importantly, the dramatic growth in women’s lifetime earnings over the past generation substantially improves boomers’ retirement prospects. Let’s compare the late boomers, born between 1956 and 1965, with pre-boomers born 20 years earlier. At age 70, according to our projections, late boomer women will have worked 33% more years than the pre-boomers. Half of late boomers will have worked at least part time for 40 years or more. At every age, working late boomer women will have earned substantially more in inflation-adjusted dollars than their pre-boomer counterparts. At age 50 to 54, for example, employed late boomer women earn 60% more than employed pre-boomer women.

This employment growth has profound effects on retirement security, which largely depends on earnings received earlier in life. Late boomer women’s own Social Security benefits will be 50% higher than the benefits received by pre boomers, after adjusting for inflation. Median pension wealth will be a third higher. And median annual per capita family income at age 70 will be a 28% for late boomer women than pre-boomer women.

That’s good news for women but also for men. For men and women combined, we project that at age 70 inflation-adjusted incomes will be one-fifth higher for the late boomers than the pre-boomers.

Boomer:  How can boomers expect their living standards to change in retirement?

Johnson: Despite the growth in retirement incomes, many boomers will see their living standards fall when they stop working. We project that between 30 and 40% of boomers may be unable to replace 75% of their age 50-54 earnings, a common benchmark for retirement income adequacy. This is not much different from the pre-boomers, so we don’t find convincing evidence that retirement security is getting worse. But the fact that so many retirees will continue to be unable to maintain their preretirement living standards is worrisome nonetheless.

Although boomers may not do worse in retirement than their predecessors on average, many older adults will continue to live in or near poverty. Despite sharp declines over the next 20 years in the share of older widowed, divorced, and never married women with incomes below 125% of the poverty level, the overall share of 70-year-olds with low incomes will not fall much. Policymakers need to remember these seniors as they work to reform our old age support programs.

Boomer: Will medical and long-term care costs undermine retirement income security?

Johnson: That’s the big uncertainty. Health-care costs are rising, and many employers are cutting back on retiree health benefits that supplement Medicare. Given Medicare’s financial problems, it’s likely that Congress will cut benefits at some point. So retirees will have to spend more out of pocket on their medical costs going forward.

Long-term care is especially worrisome, because it’s so expensive and Medicare doesn’t cover much of the costs. Nursing homes now average about $75,000 a year, and even more in certain parts of the country. Current projections suggest that about 7 in 10 boomers, and 8 in 10 boomer women, will need long-term care. Long-term care is more common for women because they tend to live longer than men, and those who outlive their husbands can’t get help from a spouse. Only about 1 in 10 have purchased private long-term care insurance. Everyone else is going to have to pay out of pocket for long-term care until they deplete all of their savings, and then they’ll have to turn to Medicaid. Home health care may be an ever bigger problem. People would rather get care at home than go into a nursing facility, yet it’s hard to get Medicaid to pay for those services. 

Boomer: How vulnerable are boomer women to potential changes in Social Security and Medicare?

Johnson: Boomer women will really depend on Social Security and Medicare. We found that 37% of women ages 65 and older now rely on Social Security for four-fifths or more of their income. That figure will fall a bit when the boomers retire, but not by much. And without Medicare, few boomers would be able to pay for their health care. The problem is that both of these programs face tremendous financial pressures and will likely have to be reformed in some way. The Social Security trust fund will run out of money in about 25 years, and the hospital trust fund for Medicare will run out of money in about a dozen years.

What matters for boomer women, of course, is how these programs are reformed. Some potential Social Security changes receiving attention include generating more revenue by expanding the payroll tax base (now limited to the first $110,100 of earnings), cutting future cost-of-living increases, trimming benefits for high-income beneficiaries, and raising the retirement age. Except for changing cost-of-living adjustments, these reforms would not have much impact on boomers at least age 55, because most proposals protect starting benefits (but not COLAs) for those near retirement. Reducing COLAs, though, could significantly erode benefits when boomer women reach their eighties, because the effects cumulate over time. And cutting starting benefits could erode retirement security for younger boomers. 

Medicare is harder to reform, because it’s less clear which benefits should be cut. Democrats generally favor having government experts decide which services to provide, based on the best and latest medical evidence. Republicans prefer having the marketplace make these decisions by providing Medicare beneficiaries with vouchers that they would use to purchase coverage from competitive insurance companies. Both approaches have the same goal—delivering quality health care more efficiently.

Boomer: Will the Affordable Care Act benefit retiring boomer women?

Johnson: The health-care reform will really help a lot of retiring boomer women. For one thing, it’s gradually closing the so-called “doughnut hole” in Medicare prescription drug coverage. Before the legislation, Medicare drug coverage temporarily ended after seniors spent a certain amount of money on drugs, and didn't kick in again until after they spent much more.

The ACA closes that coverage gap, and lots of boomer women on Medicare will benefit.

The law provides seniors with expanded preventive services, including an annual wellness visit and mammograms with no out-of-pocket cost. It also forces Medicare Advantage plans, which provide managed care to seniors who choose this option, to improve their services by requiring that they devote 85% of revenues to patient care, restricting what they can spend on overhead. And the ACA will shore up Medicare’s finances, helping to sustain the program and the current level of benefits. Savings contained in the law are projected to increase the solvency of the Medicare Hospital Trust Fund by eight years.

“The Boomer” is a column written for adults nearing retirement age and those already in their “golden years.” It will also promote reader interaction by posting e-mail responses and answering reader questions. E-mail your questions or topic ideas to thefoxboomer@gmail.com.