An empirical study on how financial literacy contributes to preparation for retirement

This study provides empirical evidence on the mechanisms through which financial literacy may be associated with saving for retirement, in the three phases of the decision-making process - information perception, information search and evaluation, and decision-making and implementation. The results indicate that financial literacy has significantly positive effects on one's awareness of post-retirement financial needs, comparing alternatives when purchasing financial products, displaying fewer present-time bias, and planning for and setting aside funds for retirement. Financial literacy not only directly contributes to planning for the future, but also indirectly via a reduction in behavioral biases.