A MODEL FOR PERSONAL FINANCIAL PLANNING TOWARDS RETIREMENT

TLDR

Sustainability of pension systems is threatened by the difficulty of non‑specialists managing their resources and retirement intentions. The study aims to analyze how financial literacy, retirement goals, optimism, risk tolerance, and planning commitment influence financial management practices and retirement resources using a structural equation model. A three‑phase structural equation model was applied to Spanish workers, linking time‑1 financial literacy, goals, optimism, risk tolerance, and planning commitment to time‑2 management practices and then to time‑3 retirement resources. The model explains 36 % of the variance in financial management practices and 53 % in retirement resources, suggesting it can assess pre‑retirement behavior and support better financial planning to sustain welfare.

Abstract

One problem for sustainability of systems pensions is how people without specialized financial training could manage their resources and their actual personal intentions towards retirement. Research objective is to analyse the relationship among several factors that affect the behaviour towards retirement, the financial management practices and the financial resources, by carrying out a structural equation model (SEM) that was tested in Spanish workers sample in three phases. The influence of financial literacy, financial retirement objectives, optimism on retirement, tolerance to financial risk, and the commitment to financial planning at time 1, are analysed as explanatory variables of financial management practices at time 2. Financial resources for retirement at time 3 are explained by financial management practices. According to results, the model can predict the 36% of the variance of financial management practices and 53% of the variance of financial resources for retirement. Thus, the model can be used for checking of knowledge of the personal financial behaviour before retirement, what enables a better personal financial planning. It would be possible to apply a model based on self-assessment in order to implement a complementary financial planning that would allow to maintain the welfare during retirement.