Financial literacy and retirement planning in chile*

Publisher: Cambridge University Press

E-ISSN: 1475-3022|15|2|203-223

ISSN: 1474-7472

Source: Journal of Pension Economics & Finance, Vol.15, Iss.2, 2016-04, pp. : 203-223

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Abstract

This paper studies the relationship between financial literacy and retirement planning in Chile, a country with mandatory defined contribution pension plans at the core of its retirement policy. Using a novel dataset, we find that very few Chileans are planning for their retirement and that the levels of financial literacy are remarkably low with only 47% of the population understand compound interest and only 18% understand the concept of inflation. We also find a positive and significant relationship between financial literacy and retirement planning suggesting that investments in financial education could have a substantial impact on the way people think about retirement and therefore on their ability to reach retirement with adequate resources.