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An empirical study on how financial literacy contributes to preparation for retirement

Published online by Cambridge University Press:  08 October 2020

Tsung-ming Yeh Open the ORCID record for Tsung-ming Yeh [Opens in a new window]
Tsung-ming Yeh*
Affiliation:
Kyushu University, Fukuoka, Japan
*
Corresponding author. Email: [email protected]
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Abstract

This study provides empirical evidence on the mechanisms through which financial literacy may be associated with saving for retirement, in the three phases of the decision-making process – information perception, information search and evaluation, and decision-making and implementation. The results indicate that financial literacy has significantly positive effects on one's awareness of post-retirement financial needs, comparing alternatives when purchasing financial products, displaying fewer present-time bias, and planning for and setting aside funds for retirement. Financial literacy not only directly contributes to planning for the future, but also indirectly via a reduction in behavioral biases.

Keywords

Financial literacyloss aversionpresent time biassaving for retirement
Type
Article
Information
Journal of Pension Economics & Finance , Volume 21 , Issue 2 , April 2022 , pp. 237 - 259
Copyright
Copyright © The Author(s), 2020. Published by Cambridge University Press

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