When the 'Silver Tsunami' Fails to Hit

The Coyne Partnership disputes claims of an impending deluge of retiring baby boomers, and explains how the truth could affect your business

by Kevin P. Coyne and Shawn T. Coyne

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About five years ago, pundits and consultants began heralding the looming retirement of baby boomers (BusinessWeek, 5/15/08)—some 78 million strong—as an enormous opportunity for the financial-services industry. The Social Security Administration went so far as to dub the expected phenomenon a "silver tsunami."

Judging by the combined spending associated with advertising campaigns as well as new product development, IT investments, and various strategic acquisitions, financial institutions jumped on the bandwagon. You've seen their ads: Fidelity National Financial (FNF), Bank of America (BAC), Charles Schwab (SCHW), Principal Financial Group (PFG), Prudential Financial (PRU), Wachovia (WB), ING, Ameriprise Financial (AMP), Hartford Financial Services Group (HIG) (which recently made three large acquisitions in just three months), and so on.

Other industries have jumped aboard, too. There are target-date mutual funds, investment funds that buy up retirement businesses, and expanded offerings from a variety of leisure industries, all counting on legions of retirees to fuel their growth.

There's just one problem: The pundits are wrong. Through at least the next 25 years (i.e., past the time the last baby boomer turns 65), the retirement market will be far smaller than the oft-cited 78 million—regardless of whether one is referring to the number of people retiring or the number of living retirees. In fact, compared with today, the growth rate of either of those two measures will be less than 4% annually for the next 25 years—and could very well be zero.

More Ebb Than Flow

Oddly, given what's at stake, it appears that very few companies actually crunched the numbers to see exactly when this tsunami would hit the shore, and exactly how large it would be. In fact, there has been no published report that we at the Coyne Partnership or our clients could find detailing the estimated number of workers vs. retirees on a year-by-year basis over the next 25 years.

This would all be fine if the arithmetic confirmed that there will be 78 million boomers joining the retirement party in a short period. But when you actually run the numbers—which the Coyne Partnership did, by painstakingly obtaining, reconciling, and analyzing data from four different government sources—a vastly different picture emerges.

Far from 78 million, the actual number of "true retirees," which excludes those who never worked in the first place, will reach only 46 million in 2017 (10 years out from our base year of 2007)—and that's if the trend to work longer stops today. Given that the trend among persons over age 50 to work longer has actually been going on since before 1994, that isn't likely. In fact, a more probable scenario, in which more older Americans choose to work beyond age 65, produces less than 36 million retirees in 2017. If that still sounds like a lot of retirees, consider this: There are already 35 million "true retirees" today. That's right, there would be essentially no growth at all in the number of retirees.

Calculating the Tides

More generously, if you expand your definition to include those older Americans who never worked (14 million today vs. 17 million in 2017), you can avoid an actual drop in one particular definition of "retirees"—but just barely.