Retirement is the most expensive purchase most people will make,yet many Americans are underfunding their retirement, according to anew study from Merrill Lynch and Age Wave.

The study, Financesin Retirement: New Challenges, New Solutions, is thecapstone of a four-year, 50,000-respondent investigation into thechanging lifescape of retirement conducted by MerrillLynch and Age Wave.

The study reports that retirement carries the highest averageprice tag compared to life's other biggest expenses, such as buying a home,raising a child and paying for college.

“Retirement is life's most expensive purchase and on average thecost of a retirement is actually many times greater than the costof other big-ticket items as well,” Lorna Sabbia, Head ofRetirement & Personal Wealth Solutions at Bank of AmericaMerrill Lynch, said during a webcast briefing.

The average cost of retirement is more than $700,000 or abouttwo-and-a-half times that of the average house and nine times morethan the average cost of a college education.

By comparison, the average cost of a home is $278,300, the costof a college education is $83,400, and the cost of raising a childto age 18 is $245,300.

Despite retirement's hefty price tag, the report finds that 81%of Americans don't know how much they'll need to fund theirretirement. In addition, a growing number of younger generationsthink they'll need to personally fund a larger portion of theirretirement and therefore expect to rely less on their employers orthe government.

“That three-legged stool for funding retirement – that beingSocial Security, employer pensions and personal savings – isbecoming wobbly at best for most people,” Sabbia said.

According to Sabbia, millennials expect 65% of their retirementincome to come from personal sources.

Add to that the fact that longevity is increasing, and morepeople are going to personally be funding longer retirements,according to Ken Dychtwald, president and founder of Age Wave.

“Future generations will be funding much longer retirements thantheir predecessors, Dychtwald said.

Kevin Crain, head of workplace financial solutions for Bank ofAmerica Merrill Lynch, offered some advice on how advisors can usethis retirement price tag to help consumers save more.

“[Considering retirement] as purchasing something in your futurechanges the dynamic of how you plan for that number,” he said. “Soyou're really trying to accumulate the assets and the ability topurchase a great future. And viewing it that way I think is adifferent approach to how traditionally advisors have worked withpeople on this subject.”

The study looks into why people aren't saving more, and foundpeople offer a variety of reasons for not saving forretirement.

The top two barriers that people cited in the study are nothaving enough money left after paying basic expenses (41%) andpaying down debt (38%).

The study also finds that there is a pretty significant“intention-action gap” in how Americans are saving for retirement.It seems Americans know they should be saving more, but they failto do so.

According to Crain, “our study found that people have goodintentions.”

However, the study finds there's a big difference betweenpeople's intentions and what they actually do.

On average, Americans said they think they should be savingabout 25% of their disposable income each year.

“And yet people are saving just one-fourth of that,” Crainexplained. “Americans are actually saving 5.5% of their disposablepersonal income.”

The savings rate has moved up from a low of about 3% during therecent recession, but it's still less than half the peak rate of13% in the early 1970s, according to the study.