Study: boomers 'paralyzed' over retirement savings.

A recent study by the Affluent Market Research Program of research company TNS reported there are 8.2 million households in the United States with a net worth of $1 million or more, excluding primary residences, up from 6.2 million in 2003. But a new study sponsored by Guardian Life Insurance Company of America exposes the flip side of that good news: Baby boomers have not set aside nearly enough money to pay for retirement, and most "are in a state of financial paralysis."

"They don't know how much to save, and they don't understand some basic financial principles such as compound interest and adequate returns, so they are doing nothing," said Frank Murtha, a Ph.D. behavioral finance expert and business professor at New York University. He is also managing member of Frank Murtha Associates.

The study, conducted by Harris Interactive, was administered online in February to 1,115 people born from 1946 to 1964 who are not yet retired, but who play an active role in retirement decisions. Only about 300 had $100,000 or more in investable assets.

Murtha said boomers with more than $100,000 had a better understanding of financial principles like portfolio diversification and the difference between risk and volatility. Boomers also erroneously tend to think that making a few big deposits later in life into their retirement savings is better than many small deposits over time.

Allocations of Boomers'
Savings, by Size

         $5,000,000 +    0%
$3,000,000-$4,999,999    0%
$1,000,000-$2,999,999    1%
    $500,000-$999,999    4%
    $250,000-$499,999    8%
    $200,000-$249,999    4%
    $150,000-$199,999    7%
    $125,000-$149,999    6%
    $100,000-$124,999    6%
      $75,000-$99,999    8%
      $50,000-$74,999    8%
      $40,000-$49,999    6%
       $30,000-39,999    4%
      $20,000-$29,999    4%
      $10,000-$19,999    4%
            $1-$9,999   14%
                   $0   13%

Source: Guardian/Harris Interactive

Note: Table made from bar graph.