Financial literacy and retirement planning: evidence from China

ABSTRACT

We study the relationship between financial literacy and retirement planning in China. We find that higher scores on the financial literacy questions are associated not only with a higher probability of retirement planning, but also a higher propensity to actively use financial markets for retirement preparation. These relationships are robust to taking into account the endogeneity of financial literacy.

KEYWORDS:

• Financial literacy
• retirement planning
• China

JEL CLASSIFICATION:

• D14
• D91

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Hukou is a system of household registration in China.

² Retirement planning, financial literacy and other background characteristics are those of household head, who is most knowledgeable about the financial situation of the household.

³ According to Ministry of Human Resources and Social Security of People’s Republic of China (2016), the replacement rates of pension for public and private sector workers in 2014, as percentage of social average wage, are about 56% and 43%, respectively.

⁴ SOE is short for state-owned enterprise.

Additional information

Funding

This work was supported by the Fundamental Research Funds for the Central Universities in China[grant number JBK170148] and the Academic Team Building Plan for Young Scholars from Wuhan University [grant number 16WSKTD008].