Examining the link between financial literacy and retirement planning: Assessing the Role of Financial Knowledge in Secure Retirement

Abstract

Retirement planning‚ especially financial planning‚ is an important personal financial behaviour․ Individuals are required to focus on and make many independent decisions regarding retirement savings plans‚ pension systems‚ investment products‚ digital financial services and future income security․ We examine the relationship between financial literacy and retirement planning and the mediation effect of financial literacy on secure retirement behaviour․ Based on past research on financial literacy and financial awareness‚ saving behaviour‚ financial attitude‚ digital financial literacy and retirement preparedness‚ the paper develops and tests three hypotheses․ The paper uses a quantitative research method and a structured questionnaire․ The synthetic sample consisted of 300 working adults․ A 5-point Likert-type scale was used to measure financial literacy‚ digital financial literacy‚ financial attitude‚ and retirement planning behaviour (1 = strongly disagree‚ 5 = strongly agree)․ Descriptive statistics‚ frequency distributions‚ correlation analysis‚ and simple regression-based decision tables were used to analyse the data․ Results showed a positive statistically important relationship between financial literacy and retirement plan‚ and digital literacy and financial attitude were positive predictors of retirement planning behaviour․ High digital financial literacy was associated with more regular retirement saving‚ understanding of pension products‚ assessment of financial risks‚ use of digital financial tools‚ seeking financial advice‚ and taking action to plan how to prepare for their future retirement․ The study concluded that financial literacy was a major factor influencing retirement plan acceptance; it recommended that employers‚ public policy‚ financial institutions‚ and education providers promote financial literacy for employees․