The IUP Journal of Applied Finance
Predictors of Retirement Saving Behavior

Article Details
Pub. Date : Oct, 2021
Product Name : The IUP Journal of Applied Finance
Product Type : Article
Product Code : IJAF31021
Author Name Sakshi Vasudeva
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 19



This study examines the effect of family influence, peer influence, risk tolerance, financial literacy and financial attitude on retirement saving habits and beliefs. The study was conducted on working people in the age group of above 25 years from both private and public sector, and the final sample consisted of 132 respondents. The study used the Structural Equation Modeling (SEM)-AMOS for the analysis of data and to test the proposed model. The respondents were also asked about their choice of retirement saving avenues. The results show that real estate (21% of the respondents) is the most preferred saving avenue, followed by FDs (19% of the respondents) and NPS (17% of the respondents). Shares have been ranked the lowest as an avenue for retirement saving because of their volatile nature. The study found that peer group has a positive and significant influence in shaping the retirement saving habits and beliefs. Financial literacy positively impacted retirement saving habits and beliefs. Similarly, financial attitude also had a significant effect on retirement habits and beliefs. Careless/imprudent financial attitude negatively affects retirement saving habits and beliefs. The findings suggest that financial literacy should be given paramount importance so that people develop positive financial attitude and would be able to save sufficient for their retirement. Financial literacy being the most important factor should not be just limited to printed material and textbooks, but the approach should be adopted since childhood so that people learn personal financial management and plan their savings for retirement.


Retirement planning is very important as life expectancies are increasing and social security systems are not universal. Retirement planning is linked to saving habit as people who start saving early build a sufficient corpus to lead their old-age life independently without any financial crisis. In India, earlier, we had strong family ties and most of the old-age parents were looked after well by their children. With the onset of globalization and consequent cultural and social changes, family ties have weakened and household expenses have increased. Hence, it is the need of the present times that old-age parents should be financially independent even after their working years.

Topa et al. (2018) defined financial planning for retirement "as a set of planned savings to accumulate wealth so that post-retirement expenses can be comfortably met with." Savings and planning for retirement are very important in the present era due to the changes in the political, cultural, economic and technological environment (Nunn, 2017).

Jamal et al. (2015) and Mahdzan and Tabiani (2013) mentioned that household savings are indispensable for comfortable retirement years as well as for the economic growth of the nation. Some start saving early, whereas others defer this decision and focus on their current financial goals such as buying a car, house, children's education, leisure activities, etc. The employees working as permanent employees in both public and private sector benefit in