Post Retirement Investment

Research by Syed Aijaz Ali Shah, Amir Naem Sharafat and Parvez Ahmed

ABSTRACT

The aim of the study is to bring an assessment how consumer knowledge and consumer characteristics affects the post retirement consumer investment choice. Five different investment option were taken into account to analyze consumer knowledge the investment options included life insurance, government bonds, stocks, time deposit, property purchase and accordingly they were analyzed similarly persons characteristics were also taken into account like consumers age, gender, name, salary to analyze consumers choice .for that purpose Paired T-test has been applied to the data. The analysis has been made on the significance value of the Paired T-test that indicates that value is less than the alpha value in consumer knowledge while in Pearson test the result test was more than alpha value which indicated no relationship. The Paired T-test showed consumer knowledge affects consumer choice; while the Pearson test showed no relationship exist between consumer choice and characteristics.

CHAPTER 1: INTRODUCTION

1.1 Overview

The objective of this research is to primarily identify and get insight about knowledge and characteristics that influence consumers to opt different choices in Postretirement Investment Plans. Retirement investment plans are growing, plan participants are now expected to perform like a financial planner. Concentrating on their saving, investment, and tax and spending decision throughout their working life. They are being offered different choices in plans to experience differently and to select a plan for themselves where they can get success. People have different attitudes and interests for future saving and for retirement plans. (Macfarland, 2003)

It is a key matter to design any individuals account program because it is difficult to decide that how much investment choices to offer them, whether they will accept many options or not, whereas classic economic theory suggest that more choices are better. But it is not necessary that more choices will always come up with successful or better outcomes as it is proved by participants' participation in 401(k) plans, it offers wide range of plans and further choices in those plans. As the choices are increased participation ration decreases (Jeffrey R. Brown, 2005)

Financial decision making is affected by financial illiteracy; lack of leaving plan can be due to ignorance of basic monetary concepts, Lack of financial literacy also results in poor borrowing behavior. Financial education programs can contribute in improving financial decision making and saving behavior. Effectives of these programs can be improved while taking serious steps. Furthermore he discussed that financial literacy is not that much as compare to financial illiteracy and it is prevalent especially among particular groups carrying low education, women and minorities. People should be provided basic financial knowledge in educational programs instead of trying to make them an investor, possibly teach them few principles of saving and investment. (Lusardi, January 2008)

There are many people who are unaware of the most basic economic and financial concepts which are needed in decision making for investment and saving. Such illiteracy is unwelcome influence; citizens in United States and in other parts of the world are not well informed about the basic financial calculations which are for saving, retirement planning and for other decisions, it emphasizes a role for those who are working for the enhancement of financial education and knowledge in the people. They further explained that it is not just the case in United States but also is in other developed countries. They concluded that education alone will not be enough for people but they should also be provided ways to change their behavior rather than providing just financial education. (Lusardi& Mitchell (2007)

There is positive relation between education at workplace and retirement saving behavior, those people who use to have some kind of information from employers they are likely to make retirement saving plan compare to those people who do not have any information. The people who have desirable financial behavior towards personal finance are more likely to have retirement saving programs. Furthermore, people who have pessimistic retirement attitude they are less likely to have retirement saving programs, as they think that saving for retirement is time consuming and it will require lot of efforts and it is unnecessary to have any retirement investment programs as it is too far away that what I will be requiring after retirement. (Joo& Grable (2005).)

The lager the family size is the less likely they are going to invest in any retirement saving plan. The people who are highly educated they are going to invest for retirement saving, they take this matter seriously and plan for retirement saving. In further finding he found that people have high income are wealthy enough they are more likely to invest in retirement saving plans. The people who receive education sponsored by employer, have good financial knowledge and are less pessimistic about retirement are more possibly to have retirement saving programs. Saving behavior is not related with racial/ethnic differences.(Joo & Grable (2005).)

Women are not going to invest in a retirement investment participation plan when greater mutual funds choices are offered in a plan. In Contrast, men are more likely to invest in retirement investment participation plan when there are more choices offered in funds. The participants who are likely to invest in large fund assortment plans women invest few amount compared to man. Furthermore, they found that women have less knowledge than men regarding retirement plans and they are more towards risk aversive approach in investment domain. (Morrin, Broniarczyk, & Inman (2011).)

Only those employees get large pension benefits increment who have been working with companies for longer period or years of service; they also concluded that the employees who get retirement after the most years of service with those companies. Therefore the companies compensate those employees with higher increment in their pension benefits that they will get after retirement from their service or job. (Allen, Clark, & Sumner, (1986))

The plans for pension, post-retirement benefits for the employees in terms of economic size and recognition. In non-financial corporations, post retirement benefits play an important role for leverage and real investment. Post retirement compulsion shows that post retirement benefits of assets and liabilities should be consolidate on balance sheet. The analysis explained that