The percentage of South Koreans older than 65 is forecast to reach 38.2 percent in 2050, the highest in the world, according to the report by the Korea Institute of Finance.
The average life expectancy of South Koreans is projected to hit 83.5 years as aging South Koreans increase their spending on health, the report added.
The report warned that the rapid aging could damage South Korea monetarily.
"The demographic changes that come with aging can weaken South Korea's growth potential. There is also a high chance that it may weigh on the country's fiscal health," the report said.
According to a report by a state-run think tank, South Korea's potential growth rate is forecast to decline to 0.74 percent in the 2040s, down from 4.56 percent from 2003-2013.
The graying population, meanwhile, can also be a boon to South Korea's financial industry, the report said, adding demand for stable financial products and the proportion of financial assets individuals carry are likely to rise amid rapid aging
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