Ready or Not, Here It Comes: A Model of Perceived Financial Preparedness for Retirement

Abstract

This study develops and tests a model of the predictors of financial preparedness for retirement using retirement planning knowledge and attitude as mediators. The study also compares the model across groups that choose to opt out or stay after being automatically enrolled in the private pension system. Structural equation modeling methodology is used to test the relationships between constructs using data from 600 employees (333 men, 267 women; M age = 30.12 years, SD = 8.39) from workplaces preparing to initiate automatic enrollment into the private pension system in Turkey. It is shown that both parental influence and life satisfaction are positively related to perceived financial preparedness for retirement. In contrast, pessimistic future economic perspectives have a negative effect on perceived financial preparedness for retirement. Moreover, the findings reveal a positive impact of retirement planning attitude and a negative impact of retirement planning knowledge on perceived financial preparedness. Mediating roles of retirement planning knowledge and attitude are determined. Path differences between those who opt out and those who stay enrolled in the private pension system are demonstrated. The study makes an original contribution by showing the impact of consumers' current life satisfaction and future economic perspectives on financial preparedness for retirement. Given that retirement and financial planning studies have generally been conducted in developed countries, research investigating the predictors of financial preparedness for retirement in emerging countries remains scarce. Moreover, this study is novel in that, unlike previous works, it considers mediating factors. Finally, a further contribution is made by examining differences in the model between individuals who choose to stay within the private pension system and those who choose to opt out.