Retirement Goal Clarity, Needs Estimation, and Saving Amount: Evidence from Hong Kong, China

By Zhu, Alex Yue Feng; Chou, Kee Lee | Journal of Financial Counseling and Planning, July 1, 2018 | Go to article overview

Retirement Goal Clarity, Needs Estimation, and Saving Amount: Evidence from Hong Kong, China


Zhu, Alex Yue Feng, Chou, Kee Lee, Journal of Financial Counseling and Planning


Although consistent with global trends, Hong Kong's population is aging much more rapidly when compared to Western countries (Lum, 2011). According to the latest projections, Hong Kong's population structure is expected to change dramatically, with a rise in the percentage of persons aged 65 years and above from 15.4% in 2015 to 33.1% in 2064 (Census and Statistics Department, 2015). This trend may result in an increased demand for financial security among elderly individuals, which is also correlated strongly to satisfaction with retirement lifestyle (Taylor & Geldhauser, 2007; Wang & Shultz, 2010). Hong Kong differs from Western countries in that its older adults follow the tradition of receiving financial support from the next generation. However, this trend has weakened (Census and Statistics Department, 2001). The newly introduced Mandatory Provident Fund (MPF) schemes have a limited reach (Chou, Chow, & Chi, 2004); consequently, private retirement savings have increased (AXA, 2005; Census and Statistics Department, 2013; HSBC, 2006).

Studies have found associations between the size of private retirement savings and demographic variables like age (Elliott, Choi, Destin, & Kim, 2011), gender (Johannisson, 2008), marital status and number of children (Love, 2010), and opportunity variables such as entitlement to retirement saving plan (Mayer, Zick, & Marsden, 2011) and educational achievement (Scholz, Seshadri, & Khitatrakun, 2006). Recent studies have focused on why different individuals with different attributes have different saving levels. Empirical findings suggest that demographic and opportunity variables are proxy variables of social force; they identify differences between high- and low-level saving groups by the mediating effects of psychological variables, including risk tolerance (Dulebohn, 2002; Jacobs-Lawson & Hershey, 2005) and future time perspective (Burtless, 2006; Howlett, Kees, & Kemp, 2008; Van Dalen, Henkens, & Hershey, 2010). More importantly, studies have found that the proxy variables of social force may also determine retirement saving level by sequentially influencing components of a financial saving framework in the following order: retirement goal clarity, financial knowledge, planning activities, and accumulation of retirement savings (Chou et al., 2015; Stawski, Hershey, & Jacobs-Lawson, 2007).

Estimating retirement saving needs, an important step in planning activities (Basu, 2005; Bi, Finke, & Huston, 2017; Li, Montalto, & Geistfeld, 1996; Stawski et al., 2007; Yuh, Montalto, & Hanna, 1998), is associated with retirement saving level and has only been examined in Mayer et al.'s (2011) multivariate model. However, the sample used to run the model was limited to one university. In addition, the model failed to control several important factors that influence private savings, including retirement goal clarity (Chou et al., 2015), personal income (Chamon & Prasad, 2005), and objective financial knowledge (Banks & Oldfield, 2007; Chan & Stevens, 2008), as well as socialization factors such as social norms (Henkens, 1999), support from friends and spouse (Duflo & Saez, 2002; Van Dalen et al., 2010), parental socialization (Van Dalen et al., 2010), and childhood socialization (Bernheim, Garrett, & Maki, 2001). Although the estimation of retirement saving needs should logically follow retirement goal clarity and financial literacy in the saving-planning framework and would be key to planning activities, studies have not tested this hypothesis. Therefore, our study uses a demographically diverse sample to answer the following questions: (a) whether the estimation of retirement saving needs is positively associated with self-reported private retirement savings when including previously uncontrolled variables; and (b) whether the estimation of retirement saving needs mediates the link between retirement goal clarity and private retirement saving. …

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