Survey finds widespread lack of understanding stymies action
By Trevor Thomas
Many baby boomers are apparently planning to catch up on their retirement savings later instead of making regular deposits to their accounts now, a new insurance company survey finds.
While it’s not really news that boomers aren’t saving enough to enjoy a comfortable retirement, the survey by the Guardian Life Insurance Company of America, New York, used behavioral science techniques to find out why.
“We found that baby boomers are in a state of financial paralysis,” says Frank Murtha, a behavioral finance expert and business professor at New York University, who conducted the study. “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.”
Boomers in general clearly need more education about sound financial planning if they are going to retire contentedly, he adds.
Among the survey’s findings:
80% of boomers are concerned about having adequate income during retirement, but half said they aren’t sure how much money they will need.
24% said they were on track to have enough retirement savings.
55% said they could comfortably live on 80% of their current income, yet in answer to another question, only 27% said they could save more than 20% of their income today. 17% said they could save nothing.
In actuality, only 16% saved more than 20% of their income in 2003, while 23% said they saved nothing.