Financial preparation for retirement: multidimensional analysis of the perception of Brazilians

Vieira, Kelmara Mendes; Matheis, Taiane Keila; Rosenblum, Tamara Otilia Amaral

doi:10.1590/1808-057x20221705.en

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Original Article • Rev. contab. finanç. 34 (91) • 2023 • https://doi.org/10.1590/1808-057x20221705.en copy

Financial preparation for retirement: multidimensional analysis of the perception of Brazilians

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

This article aims to assess the perception of financial preparation for retirement in the non-retired Brazilian population. Also, it seeks to identify how socioeconomic, demographic, and behavioral variables influence financial preparation for retirement. This study advances by using a multidimensional measure of financial preparation for retirement in a comprehensive sample of Brazilians, bringing significant contributions to the implementation of new public policies for the most vulnerable groups. Identifying the level of financial preparation for retirement and the most vulnerable groups is key for a better understanding of the impact of social security and retirement on the lives of Brazilian citizens. In the Brazilian context, the Financial Preparation for Retirement Scale (FPRS) makes it possible to assess the public policies designed and it serves as a parameter for them to be reformulated, with a view to improving financial preparation for retirement in the most vulnerable groups. This is a survey, with 2,920 respondents from all Brazilian regions. The analysis techniques consisted in descriptive statistics, association test, and multiple regression analysis. Most Brazilians show low or very low financial preparation for retirement. It has been identified that 3 out of 4 Brazilians stop to think about how much they would need to save for their retirement. Despite being able to carry out some financial planning for retirement, most Brazilians cannot have good future expectations and savings behavior. Women, young people, divorced/separated persons, black persons, individuals with up to complete elementary education, borrowed housing, unemployed, with a gross monthly family income of up to R$ 1,100.00 and having 4 or more dependent persons constitute the profile of citizens less capable of dealing with financial preparation for retirement.

Keywords:
financial preparation; retirement; Social Security Reform; financial literacy; behavioral finance

Variable	Expected relationship	Authors
Gender	Women think and plan less about their retirement, negatively affecting their retirement preparation.	Kumar et al. (2019Kumar, S., Tomar, S. & Verma, D. (2019). Women’s financial planning for retirement: Systematic literature review and future research agenda.International Journal of Bank Marketing,37(1), 120-141. ); Noone et al. (2010Noone, J. H., Stephens, C., & Alpass, F. (2010). The Process of Retirement Planning Scale (PRePS): Development and validation.Psychological Assessment,22(3), 520. )
	Women are less financially literate, this has a negative impact on their income and projection for the future.	Bucher-Koenen et al. (2017Bucher-Koenen, T., Lusardi, A., Alessie, R., & Van Rooij, M. (2017) How financially literate are women? An overview and new insights. Journal of Consumer Affairs, 51, 255-283.); Kalmi and Ruuskanen (2018Kalmi, P., & Ruuskanen, O. P. (2018). Financial literacy and retirement planning in Finland.Journal of Pension Economics & Finance,17(3), 335-362.); Niu et al. (2020Niu, G., Zhou, Y., & Gan, H. (2020). Financial literacy and retirement preparation in China.Pacific-Basin Finance Journal,59, 101262.); Potrich et al. (2018Potrich, A. C. G., Vieira, K. M., & Kirch, G. (2018). How well do women do when it comes to financial literacy? Proposition of an indicator and analysis of gender differences.Journal of Behavioral and Experimental Finance,17, 28-41.)
	Men and women have the same retirement savings behavior.	Arrondel et al. (2013Arrondel, L., Debbich, M., & Savignac, F. (2013). Financial literacy and financial planning in France. Numeracy, 6(2), 1-23.); Cupák et al. (2019Cupák, A., Kolev, G. I., & Brokešová, Z. (2019). Financial literacy and voluntary savings for retirement: novel causal evidence.The European Journal of Finance,25(16), 1606-1625.); França and Hershey (2018França, L. H., & Hershey, D. A. (2018). Financial preparation for retirement in Brazil: A cross-cultural test of the interdisciplinary financial planning model.Journal of Cross-Cultural Gerontology,33(1), 43-64.)
Age	Individuals are more likely to plan for retirement as they age.	Clark et al. (2019Clark, R. L., Hammond, R. G., & Khalaf, C. (2019). Planning for retirement? The importance of time preferences.Journal of Labor Research,40(2), 127-150.)
Age	Older (working age) and less educated individuals are less likely to save for retirement.	Witvorapong et al. (2022Witvorapong, N., Yoon, Y., & Pothisiri, W. (2022). Do expectations for post-retirement family and government support crowd out pre-retirement savings? Insights from the working-age population in Thailand.Journal of Pension Economics & Finance,21(2), 218-236.)
Marital status	Married men and women are more likely to undertake retirement planning and preparation.	Clark et al. (2019Clark, R. L., Hammond, R. G., & Khalaf, C. (2019). Planning for retirement? The importance of time preferences.Journal of Labor Research,40(2), 127-150.); De los Santos et al. (2020De los Santos, J. A. A., Labrague, L. J., & Milla, N. E. (2020). Happiness and retirement readiness among pre-retiring employees: A cross-sectional study.Ageing International,45(1), 85-98.)
Marital status	Both single men and women are less likely to plan for retirement.	Clark et al. (2019Clark, R. L., Hammond, R. G., & Khalaf, C. (2019). Planning for retirement? The importance of time preferences.Journal of Labor Research,40(2), 127-150.); De los Santos et al. (2020De los Santos, J. A. A., Labrague, L. J., & Milla, N. E. (2020). Happiness and retirement readiness among pre-retiring employees: A cross-sectional study.Ageing International,45(1), 85-98.)
Educational level	Individuals with a higher educational level tend to have greater planning and savings for retirement.	Clark et al. (2019Clark, R. L., Hammond, R. G., & Khalaf, C. (2019). Planning for retirement? The importance of time preferences.Journal of Labor Research,40(2), 127-150.); Niu et al. (2020Niu, G., Zhou, Y., & Gan, H. (2020). Financial literacy and retirement preparation in China.Pacific-Basin Finance Journal,59, 101262.)
	Individuals who have a Master’s and Doctorate degrees tend to be more prepared for retirement than those who have an undergraduate degree.	De los Santos (2020De los Santos, J. A. A., Labrague, L. J., & Milla, N. E. (2020). Happiness and retirement readiness among pre-retiring employees: A cross-sectional study.Ageing International,45(1), 85-98.)
	Individuals who have an undergraduate degree tend to be more prepared for retirement than those who have not.	De los Santos (2020De los Santos, J. A. A., Labrague, L. J., & Milla, N. E. (2020). Happiness and retirement readiness among pre-retiring employees: A cross-sectional study.Ageing International,45(1), 85-98.); Kalmi and Ruuskanen (2018Kalmi, P., & Ruuskanen, O. P. (2018). Financial literacy and retirement planning in Finland.Journal of Pension Economics & Finance,17(3), 335-362.)
Income	Individuals with higher income levels show greater financial preparation, including retirement savings.	Clark et al. (2019Clark, R. L., Hammond, R. G., & Khalaf, C. (2019). Planning for retirement? The importance of time preferences.Journal of Labor Research,40(2), 127-150.); Cupák et al. (2019Cupák, A., Kolev, G. I., & Brokešová, Z. (2019). Financial literacy and voluntary savings for retirement: novel causal evidence.The European Journal of Finance,25(16), 1606-1625.); Rai et al. (2019Rai, K., Dua, S., & Yadav, M. (2019). Association of financial attitude, financial behaviour and financial knowledge towards financial literacy: A structural equation modeling approach.FIIB Business Review, 8(1), 51-60.)
Income	Poorer individuals do not have much to save, and this negatively impacts their savings behavior.	Witvorapong et al. (2022Witvorapong, N., Yoon, Y., & Pothisiri, W. (2022). Do expectations for post-retirement family and government support crowd out pre-retirement savings? Insights from the working-age population in Thailand.Journal of Pension Economics & Finance,21(2), 218-236.)
Race/ethnicity	Black and Hispanic individuals have lower incomes, less wealth, and less preparation for retirement.	Tamborini and Kim (2020Tamborini, C. R., & Kim, C. (2020). Are you saving for retirement? Racial/ethnic differentials in contributory retirement savings plans.The Journals of Gerontology: Series B,75(4), 837-848.)
Occupation	Employed individuals are more likely to save for retirement.	Cupák et al. (2019Cupák, A., Kolev, G. I., & Brokešová, Z. (2019). Financial literacy and voluntary savings for retirement: novel causal evidence.The European Journal of Finance,25(16), 1606-1625.); De los Santos (2020De los Santos, J. A. A., Labrague, L. J., & Milla, N. E. (2020). Happiness and retirement readiness among pre-retiring employees: A cross-sectional study.Ageing International,45(1), 85-98.); Kalmi and Ruuskanen (2018Kalmi, P., & Ruuskanen, O. P. (2018). Financial literacy and retirement planning in Finland.Journal of Pension Economics & Finance,17(3), 335-362.)
Occupation	Self-employed workers are more likely to prepare for retirement.	Niu et al. (2020Niu, G., Zhou, Y., & Gan, H. (2020). Financial literacy and retirement preparation in China.Pacific-Basin Finance Journal,59, 101262.)

Variables	Alternatives	Frequency	Percentage
Gross monthly individual income	Up to R$ 1,100.00	465	16.2
	Between R$ 1,100.00 and R$ 2,200.00	733	25.6
	Between R$ 2,200.01 and R$ 3,300.00	412	14.4
	Between R$ 3,300.01 and R$ 4,400.00	290	10.1
	Between R$ 4,400.01 and R$ 5,500.00	269	9.4
	Between R$ 5,500.01 and R$ 8,800.00	309	10.8
	Between R$ 8,800.01 and R$ 11,000.00	161	5.6
	Between R$ 11,000.01 and R$ 22,000.00	185	6.5
	Above R$ 22,000.00	39	1.4
Gross monthly family income	Up to R$ 1,100.00	178	6.3
	Between R$ 1,100.00 and R$ 2,200.00	418	14.7
	Between R$ 2,200.01 and R$ 3,300.00	373	13.1
	Between R$ 3,300.01 and R$ 4,400.00	317	11.1
	Between R$ 4,400.01 and R$ 5,500.00	318	11.2
	Between R$ 5,500.01 and R$ 8,800.00	485	17.0
	Between R$ 8,800.01 and R$ 11,000.00	305	10.7
	Between R$ 11,000.01 and R$ 22,000.00	338	11.9
	Above R$ 22,000.00	113	4.0
Has dependents	None	1,005	34.7
	1	947	32.7
	2	545	18.8
	3	227	7.8
	4 or more	173	6.0
Has a consigned payroll loan	No	2,430	84.4
Has a consigned payroll loan	Yes	450	15.6
About expenses	I spend more than I earn	624	21.5
	I spend equal to what I earn	1,052	36.4
	I spend less than I earn	1,220	42.1
How many banks you have a relationship with	None	82	3.2
	1	868	34.1
	2	934	36.6
	3	409	16.0
	4 or more	256	10.0

Variables	Alternatives	Frequency	Percentage
How long until you retire?	Does not know	553	19.9
	Up to 10 years	560	20.2
	11 to 20 years	529	19.1
	21 to 30 years	584	21.0
	Over 31 years	549	19.8
Have you ever tried to figure out how much you need to save for retirement?	No	2,224	76.7
	Yes, I know approximately	585	20.2
	Yes, I know exactly	89	3.1
Do you have any specific retirement plans?^*	No	939	32.2
	Yes, I have been contributing to the public pension fund	1,421	48.8
	Yes, I bought/am buying apartment(s)/land(s) for retirement	359	12.3
	Yes, I buy stocks, funds, or bonds for long-term investment for retirement	275	9.4
	Yes, I have a life insurance policy	142	4.9
	Yes, I have money in savings	388	13.3
	Yes, I have a pension fund from my employer	65	2.2
	Yes, I have a private pension fund	162	5.6
	Other	78	2.7

Variables	Alternatives	Frequency	Percentage
How financially prepared do you feel for retirement?	Not at all	973	33.5
	Very little	831	28.5
	Little	792	27.2
	Much	239	8.2
	Very much	76	2.6
Comparing your financial status today to what you believe you will have when you retire, your financial status is:	Much worse than what I'll have when I retire	213	7.4
	Worse than what I'll have when I retire	675	23.4
	Same as what I'll have when I retire	957	33.3
	Better than what I'll have when I retire	816	28.3
	Much better than what I will have when I retire	220	7.6
Are you currently depending on someone else’s financial help to support your monthly expenses?	No	1,726	59.7
	Yes, I count on help to cover less than 25% of my expenses	317	10.9
	Yes, I count on help to cover 25% to 50% of my expenses	302	10.4
	Yes, I count on help to cover 51% to 75% of my expenses	178	6.1
	Yes, I count on help to cover more than 75% of my expenses	202	7.0
	Yes, I count on help, but I don’t know when my expenses are paid by the person who helps me	171	5.9

Dimension	Variables	Mean	Percentages
Dimension	Variables	Mean	1^*	2^*	3^*	4^*	5^*
Future expectation	I believe I’m saving enough to secure the standard of living I want in retirement.	2.4	30.7	25.2	23.8	12.5	7.8
	I feel that I will achieve the financial goals I set for myself.	3.0	14.7	16.8	32.5	20.8	15.2
	I feel able to save enough money to last until the end of my life.	2.5	29.7	23.1	24.0	13.9	9.4
	I feel that I will be financially secure until the end of my life.	2.6	27.3	21.8	25.5	14.6	10.8
	I think a lot about future finances.	3.6	8.2	13.3	23.0	24.0	31.7
Financial planning	I often compare my current financial position with the financial position I would like to have in retirement.	3.0	19.1	18.3	25.7	17.4	19.5
	I think about the financial issues of retired people.	3.2	14.9	17.6	24.5	21.0	22.1
	I often talk to my family about financial issues for retired people.	2.5	28.8	24.4	23.5	11.8	11.5
Savings behavior	I feel able to save money to make my dreams come true.	3.0	14.2	19.5	30.9	18.9	16.4
	I make a reserve of money that I receive monthly for some future need.	2.8	26.2	21.2	19.1	15.9	17.6
	I save part of my income every month.	2.7	29.7	19.7	19.6	14.7	16.3
	I save money regularly to achieve long-term financial goals.	2.6	29.8	21.3	18.3	15.4	15.2
	I start saving more when I get a pay rise.	2.8	26.0	19.2	22.4	15.6	16.7

Dimension	Mean	Standard deviation	Percentages
Dimension	Mean	Standard deviation	VL^*	L^*	H^*	VH^*
Future Expectation	2.5	0.99	18.3	34.4	28.7	18.5
Financial Planning	2.6	1.05	18.8	27.3	29.5	24.4
Savings Behavior	2.4	1.14	30.4	26.3	20.2	23.0
Financial Preparation for Retirement	2.5	1.00	16.2	35.0	27.5	21.4

Financial preparation for retirement (		Very low (1)	Low (2)	High (3)	Very high (4)	Qui² Pearson [p value]
Variables	Categories	% (line)	% (line)	% (line)	% (line)	Qui² Pearson [p value]
Sex	Male	13.7	31.2	30.5	24.6	30.01 [0.00]
Sex	Female	17.8	37.4	25.8	19.1	30.01 [0.00]
Age	18 to 29 years	16.8	37.5	28.4	17.2	24.75 [0.00]
	30 to 38 years	15.0	32.9	30.4	21.7
	39 to 48 years	15.7	33.3	29.5	21.4
	49 to 78 years	16.6	35.4	22.6	25.4
Marital status	Single	16.8	36.6	28.9	17.7	52.19 [0.00]
	Married or living in a marriage-like relationship	13.9	33.9	28.4	23.8
	Separated/divorced	24.6	34.8	20.3	20.3
	Widower	23.3	20.0	10.0	46.7
	Other	21.1	42.1	21.1	15.8
Race/ethnicity	White	14.0	33.9	30.2	21.9	52.46 [0.00]
	Black	25.1	34.7	24.7	15.5
	Brown	18.8	39.8	19.5	21.8
	Other	20.8	27.1	31.3	20.8
Educational level	Incomplete Elementary School	32.6	26.9	17.1	23.4	208.51 [0.00]
	Elementary School	25.8	42.3	8.9	23.0
	Technical Course	17.1	30.5	26.2	26.2
	High School	19.2	39.1	21.6	20.1
	Higher Education	13.8	38.4	30.2	17.6
	Specialization or MBA	9.7	26.5	36.4	27.4
	Master’s or Doctorate degree	7.9	28.9	45.0	18.2
Occupation	Civil servant	10.4	32.9	34.8	21.9	87.03 [0.00]
	Salaried employee	20.3	36.2	22.7	20.9
	Private practitioner	16.7	28.4	33.3	21.6
	Self-employed worker	18.2	37.0	24.1	20.7
	Business owner	12.0	27.4	28.0	32.6
	Does not work	18.2	42.0	28.2	11.6
	Other	17.2	39.5	28.7	14.6
Gross monthly individual income	Up to R$ 1,100.00	19.1	41.7	23.2	15.9	227.95 [0.00]
	Between R$ 1,100.00 and R$ 2,200.00	23.3	41.7	15.6	19.4
	Between R$ 2,200.01 and R$ 3,300.00	20.1	36.9	28.2	14.8
	Between R$ 3,300.01 and R$ 4,400.00	11.7	31.4	34.1	22.8
	Between R$ 4,400.01 and R$ 5,500.00	13.4	30.1	32.3	24.2
	Between R$ 5,500.01 and R$ 8,800.00	7.8	32.7	35.3	24.3
	Between R$ 8,800.01 and R$ 11,000.00	9.3	26.7	36.6	27.3
	Between R$ 11,000.01 and R$ 22,000.00	4.3	18.4	42.7	34.6
	Above R$ 22,000.00	2.6	25.6	43.6	28.2
Gross monthly family income	Up to R$ 1,100.00	20.2	48.3	14.0	17.4	311.16 [0.00]
	Between R$ 1,100.00 and R$ 2,200.00	28.2	39.5	11.7	20.6
	Between R$ 2,200.01 and R$ 3,300.00	21.7	43.2	20.6	14.5
	Between R$ 3,300.01 and R$ 4,400.00	23.0	36.9	22.4	17.7
	Between R$ 4,400.01 and R$ 5,500.00	17.9	32.4	28.3	21.4
	Between R$ 5,500.01 and R$ 8,800.00	10.3	36.5	34.2	19.0
	Between R$ 8,800.01 and R$ 11,000.00	7.2	30.8	38.4	23.6
	Between R$ 11,000.01 and R$ 22,000.00	5.9	23.4	43.8	26.9
	Above R$ 22,000.00	1.8	20.4	39.8	38.1

Model	Coefficients	Wald’s Chi²	Sig.	VIF
Dummy educational level	0.246	58.355	0.000	1.199
Dummy housing	0.104	11.875	0.001	1.087
Dummy consigned payroll loan	-0.089	5.259	0.022	1.100
Dummy expenses	-0.601	272.601	0.000	1.109
Dummy saving for retirement	0.354	95.670	0.000	1.199
How financially prepared you feel for retirement	0.307	344.031	0.000	1.341
How many banks/cooperatives you have a relationship with	0.056	31.500	0.000	1.083
Comparing your situation today with what you believe you will have when you retire	0.002	0.016	0.900	1.075
Age	-0.004	9.881	0.002	1.273

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