The Academy of Financial Services 35th Annual Meeting

Financial advice, financial literacy, retirement

We analyse the effect of financial advice, financial literacy and social interaction on three different phases of households’ retirement saving decisions. On the early phase of decision, we find having financial advice is the most and only important factor which increases the probability of participating in a retirement saving scheme. In the middle phase, households’ decisions are only related to financial literacy, those with better financial literacy are more likely to make a higher contribution rate and choose riskier funds. And moving into the final phase, both financial advice and financial literacy relate positively to the ultimate total amount of retirement saving accumulated. Viewed collectively, we propose that financial advice and financial literacy benefit different phases of the decision making, they complement each other and jointly lead to a better ultimate outcome overall. However, social interaction is of little help in facilitating better household retirement saving decisions.