The term “silver tsunami” generally refers to the large cohort of Americans entering their retirement years as the baby boom generation, born in the years 1946 to 1964, continues to age. The term, considered by some to be ageist and offensive, is used to highlight both the economic opportunities created by an aging population and the challenges it may pose to society.

What Is the ‘Silver Tsunami’?

“Silver tsunami” began to gain currency at the start of the 2000s. One early reference appeared in a September 2001 report from the Pew Internet & American Life Project, which highlighted a surge of internet users then ages 50 to 64, calling the trend a “silver tsunami.” Some 20 years later, that group is now 70 to 84, and the tsunami rolls on.

Baby boomers are not the first generation to reach their 70s, 80s, 90s, or even 100s, of course, but their very numbers have magnified their impact. Two excerpts from a May 2023 report from the U.S. Census Bureau tell the story:

• “In 2020, there were 55.8 million people age 65 and over in the United States (16.8% of the total
  population), up 38.6% from 40.3 million in 2010.”
• “The share of the population age 65 and over more than doubled between 1940 and 2020, from less than 7% to nearly 17%.”

The trend is not confined to the United States, instead playing out to various degrees all around the planet. According to the World Health Organization (WHO), “Every country in the world is experiencing growth in both the size and the proportion of older persons in the population.”

The WHO predicts that the number of people ages 60 and older worldwide will increase from 1 billion in 2020 to 1.4 billion in 2030 and 2.1 billion by 2050. What’s more, the WHO notes, while this trend “started in high-income countries (for example, in Japan, 30% of the population is already over 60 years old), it is now low- and middle-income countries that are experiencing the greatest change.”

The Impact of an Aging Population

In addition to every part of the world, the impact of this demographic shift may be felt in virtually every sector of the economy.

As the International Monetary Fund (IMF) puts it, “the most formidable demographic challenge facing the world is no longer rapid population growth, but population aging.”  

That challenge is cropping up in several ways. For example, employers can face worker shortages as more people retire.

A January 2023 report from the Federal Reserve Bank of Atlanta noted that there were, at that point, 1.7 job openings in the U.S. for every available worker. “A retirement boom coupled with a shrinking pool of younger people means the labor force is not replenishing itself,” the report said, adding that those demographic factors could “explain fully half of the gap between labor supply and demand.”

The declining labor force in the U.S. is also creating new challenges for the Social Security system, where contributions from current workers help fund the benefits paid out to retirees. “The ratio of workers paying Social Security payroll taxes to people drawing benefits has dropped from four-to-one in 1965 to just under three-to-one in 2022,” the Bipartisan Policy Center reported in April 2023.

Challenges for Employers

The wave of retirements has presented challenges for employers in recent years. But the impact has varied among industries.

The manufacturing sector, for example, faces both a worker shortage and a skills shortage. A 2021 report from Deloitte and the Manufacturing Institute predicted that from 2020 to 2030, the manufacturing sector would need to fill some 4 million jobs, 2.5 million of those resulting from retirements. However, the report also foresaw 2.1 million jobs going unfilled due to a lack of necessary skills among younger workers.

The problem may be especially acute in the healthcare sector. A 2021 Mercer study predicted retirement-driven shortages of primary care physicians, nurses, and mental health professionals in many parts of the U.S. by 2026. Lower-paid healthcare workers may be in especially short supply, with a projected 3.2 million jobs going unfilled. All this is happening, of course, at a time when an aging population is putting ever-greater demands on the healthcare system.

For many employers, the challenge will be attracting and retaining workers, along with the need for increased on-the-job training to close the skills gap. The situation may also call for an increased investment in technology to help take up some of the slack. Immigration could play a role as well.

Promoting Healthy Aging

The “silver tsunami” isn’t driven simply by the size of the older population, but by the fact that life expectancy has grown markedly over the decades. A man reaching age 65 in 1960 had an average life expectancy of 12.8 additional years; for a woman, the figure was 15.8 years. By 2016, that had increased to 18.0 years for men and 20.6 years for women.

A large part of that increase can be attributed to advances in medical care and a better understanding of the behaviors that contribute to healthy (or unhealthy) aging. The National Institute on Aging, for example, singles out “staying active, making healthy food choices, getting enough sleep, limiting your alcohol intake, and proactively managing your health care” as ways to promote healthy aging.

But while Americans are living longer on average, and many are enjoying more robust health later in life, healthcare costs remain a problem for a significant portion of the population and society in general. According to a Fidelity Investments study, a single person age 65 in 2023 is likely to need about $157,500 to cover their healthcare expenses in retirement, a figure that doubles for the average retired couple.

Economic and Societal Opportunities

The “silver tsunami” can also provide some golden opportunities. Living longer gives many men and women time to do more of the things that interest them, whether it’s travel, pursuing hobbies, or devoting themselves to their families and communities. And of course, many older people continue to work well past traditional retirement age, sometimes because they need to for economic reasons but often because they want to continue making a contribution and because employers value their experience.

In addition, the prospect of living longer encourages people to save and invest, resulting in what economists call a demographic dividend for the nation.

At the same time, older people often have money to spend. As the most recent AARP Longevity Economy Outlook report found, “In the five largest consumer product categories, those age 50 and older in 2020 were responsible for roughly half or more of global spending. These five were health (60%), miscellaneous goods and services, which include professional and financial services (52%), housing and utilities (51%), food and non-alcoholic beverages (49%), and transport (49%). They also account for most of the spending on recreation and culture (53%) and furnishings and household maintenance (50%).”

The report added, “Through its spending on goods and services, the 50-plus population supported one-third of the world’s jobs in 2020, or just over 1 billion jobs, generating $23 trillion in labor income. By 2050, those age 50 and older are projected to support 1.5 billion jobs (38% of jobs worldwide), and their impact on labor income will more than double to $53 trillion.”

What to Expect in the Future

With the youngest baby boomers just turning 60 in 2024, the “silver tsunami” has far from ebbed. While much of its future impact may be beyond predicting, a few trends seem likely.

Slower Economic Growth

An aging population is generally associated with slower economic growth due to declining labor force participation. Experts differ, however, on how much of a slowdown to expect or whether other factors, such as investments by businesses to increase productivity, might mitigate it.

Greater Healthcare Spending

Because older people tend to spend more on prescription drugs and other healthcare, companies in those sectors of the economy are likely to benefit. For example, a Peterson-KFF analysis of U.S. government data found that in 2019, the 65-plus cohort accounted for 35% of healthcare spending while representing just 17% of the population.

Changes in Housing

With many Americans wanting to age in place, the demand for what the Census Bureau calls “aging-ready homes” will likely grow. At a minimum, the agency says, such homes need to have three features: a step-free entryway into the home and a bedroom and full bathroom on the first floor.

Demand for nursing homes and assisted living facilities is also likely to rise at the older end of the aging spectrum. As the Population Reference Bureau notes, “the proportion of older adults living in nursing homes increases considerably as they reach ages 80 and beyond.” This suggests that “the larger number of baby boomers will mean substantial increases in the number of people needing such living arrangements after 2030,” the group says.

The Bottom Line

The aging population worldwide, sometimes referred to as a “silver tsunami,” presents challenges and opportunities for business, for society, and for the individuals themselves. While it’s easy to see the costs and difficulties associated with aging, it’s also important to recognize the valuable asset that older people represent.