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The Great Retirement Boom explained: What you need to know

Baby boomers are retiring en masse, leaving a labor shortage in the workforce and creating economic shifts. Here's what it means for businesses.

The United States is in the middle of another retirement wave as baby boomers leave the workforce.

While there are several generations in today's society, baby boomers -- born between 1946 and 1964 -- are the second-largest generation in society today, with approximately 71.6 million people, according to Pew Research Center in a 2020 tabulation of the U.S. Census Bureau population estimates. This number is approximately 21.4% of the total population. So, when a population this large leaves the workforce, the impact is significant.

This next wave of retirement is known as the Great Retirement Boom.

What is the Great Retirement Boom?

The Great Retirement Boom -- sometimes called the silver tsunami -- refers to the large number of individuals from the baby boomer generation reaching retirement age and leaving the workforce.

Every generational shift has multiple implications for society and the workforce, and this is no different. For the labor force, it means a significant drop in available workers as baby boomers are replaced by younger generations.

There are other implications for this retirement boom, too. Baby boomers have the greatest concentration of wealth of all generations, much of which they will likely pass on to their children and grandchildren -- but not before spending a little bit of it. This could mean an increase in the amount of travel and thus a boom for the travel industry. On the flip side, a large aging population puts strain on the healthcare system, which already has its challenges, including finding enough doctors and nurses.

This retirement boom has been anticipated for many years. There have been many discussions and preparations among policymakers, businesses and individuals to address the potential effect in all aspects of society.

What is driving the Great Retirement Boom?

There is no single cause for the Great Retirement Boom. Instead, there are multiple factors at play. First and foremost is baby boomers have the ability to retire comfortably. Of all the generations, it is the wealthiest, with an average net worth of $1.6 million. If baby boomers were frugal with their earnings and wise with their investments, they might choose to retire at 65.

Other aspects were not so voluntary. Baby boomers are not as computer-literate as their successors and often struggle to remain relevant in the modern workforce. Ageism, in particular, became a factor, with many workers laid off in their 50s, wondering if they would ever find full-time employment again.

The disruption of the COVID-19 pandemic and lockdown was also a factor in this retirement wave. Aging baby boomers decided not to return to the workforce or return to the office as the pandemic eased. In the third quarter of 2020 alone, 30 million baby boomers retired.

How are businesses backfilling jobs?

Businesses are facing multiple challenges to fill jobs over the next few years. Baby boomer retirement is only one of them. As workers retire, their jobs may not be filled due to AI taking roles that would otherwise go to people. The challenge is whether or not AI can fill the role of every retiree.

A massive retirement wave means a vacuum at the top of every business, as experienced, veteran staff leave and take 30 to 40 years of experience with them. If too many senior employees leave one company, that leaves a void at the top. Companies either have to train and promote employees who may not be ready, look overseas and bring in staff with an H-1B visa, or dig deep into their pockets and pay retirees to come out of retirement and help.

But this mass retirement was foreseen. Many employers have used recruiting practices designed to replace veteran employees about to leave the workforce. Businesses looked for people with specific skill sets, talents and potential to replace retiring workers. In many cases, businesses paired up new hires with soon-to-be-retired employees acting as mentors.

Reflecting generational changes, many younger employees enjoy flexibility in their working arrangements that baby boomers did not enjoy, such as working from home or more flexible hours.

And, in some cases, employers retain older employees who are not ready to fully retire by offering reduced hours and flexible work arrangements to keep them on a little longer.

Employers are also investing in training and other development programs for existing employees to prepare them to take on additional responsibilities or fill roles left vacant by the retiring workforce.

Great Retirement Boom statistics

While there are reports of people in their 50s struggling to find work, many aging workers are still in the workforce. The U.S. Bureau of Labor Statistics said, in 2020, about 29.3% of people ages 55 and older were still participating in the labor force.

The earliest that Americans can retire and collect Social Security benefits and their 401(k) is 62. And the median age of retirement for baby boomers is approximately 62, according to the "Transamerica Retirement Survey."

Baby boomers also hold about 51% of the nation's wealth, as of the third quarter of 2023, according to Federal Reserve data. This may be where they have the greatest impact depending on how they spend their money in retirement.

Andy Patrizio is a technology journalist with almost 30 years' experience covering Silicon Valley who has worked for a variety of publications -- on staff or as a freelancer -- including Network World, InfoWorld, Business Insider, Ars Technica and InformationWeek. He is currently based in southern California.

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