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Effect of Financial Literacy on Retirement Preparedness among Employees in the Insurance Sector in Kenya

Author

Listed:
  • Emma Aluodi
  • Amos Njuguna
  • Bernard Omboi

Abstract

The failure to comprehend financial matters has been considered the main reason behind retirement problems faced by many individuals. Insurance firms being dominant private player in retirement; the universal assumption is that its’ employees have more knowledge of the pension systems and how it affects them. It is equally assumed that these employees are perfectly informed and rely on accurate knowledge regarding their likely retirement benefits and consumption needs and therefore able to arrive at an optimal savings decisions and make better choices for their retirement. This study dissipates this notion after investigating the effect of financial literacy on retirement planning by employees in the insurance sector in Kenya. Using explanatory research design, the study employed stratified proportionate random sampling method to select the respondents. Data was collected using questionnaires and analysed by use of one way ANOVA and Pearson correlational analysis. Hypotheses were tested by use of both, multiple linear regression and multinomial logistic regression. The study reveals that financial literacy has no significant effect on retirement preparedness. This finding offers great insights and implication in policy making for both the government and institutions reforms.

Suggested Citation

  • Emma Aluodi & Amos Njuguna & Bernard Omboi, 2017. "Effect of Financial Literacy on Retirement Preparedness among Employees in the Insurance Sector in Kenya," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(10), pages 242-242, September.
    • Handle: RePEc:ibn:ijbmjn:v:12:y:2017:i:10:p:242
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    References listed on IDEAS

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    1. Rob Alessie & Maarten van Rooij & Annamaria Lusardi, 2011. "Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands," CeRP Working Papers 110, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    2. Barbara A. Butrica & Karen E. Smith & Eric J. Toder, 2009. "Retirement Security and the Stock Market Crash: What Are the Possible Outcomes?," Working Papers, Center for Retirement Research at Boston College wp2009-30, Center for Retirement Research, revised Nov 2009.
    3. James Poterba & Joshua Rauh & Steven Venti & David Wise, 2007. "Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth," NBER Chapters, in: Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), pages 2062-2086, National Bureau of Economic Research, Inc.
    4. Rob Alessie & Maarten van Rooij & Annamaria Lusardi, 2011. "Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands," CeRP Working Papers 110, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    5. Alessie, Rob & Van Rooij, Maarten & Lusardi, Annamaria, 2011. "Financial literacy and retirement preparation in the Netherlands," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 527-545, October.
    6. Bucher-Koenen, Tabea & Lusardi, Annamaria, 2011. "Financial literacy and retirement planning in Germany," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 565-584, October.
    7. Johan Almenberg & Jenny Säve-Söderbergh, 2011. "Financial Literacy and Retirement Planning in Sweden," CeRP Working Papers 112, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    8. Almenberg, Johan & Säve-Söderbergh, Jenny, 2011. "Financial literacy and retirement planning in Sweden," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 585-598, October.
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    Cited by:

    1. Ahmad Saleh Ghadwan & Wan Marhaini Wan Ahmad & Mohamed Hisham Hanifa, 2023. "Financial Planning for Retirement: The Moderating Role of Government Policy," SAGE Open, , vol. 13(2), pages 21582440231, June.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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