FINANCIAL LITERACY AND RETIREMENT PLANNING AMONG CORPORATE EMPLOYEES IN INDONESIA

• Main Author: Arie Bastian, Dhanur
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/46029
• Institution: Institut Teknologi Bandung

The retirement fund system in Indonesia has been thriving to a higher level. The government has mandated Badan Penyelenggara Jaminan Sosial (BPJS) Ketenagakerjaan to establish a compulsory retirement fund for all workers in Indonesia. The shifting from defined benefit retirement plan to defined contribution retirement plan is currently trending. The public retirement fund from government is very basic for all levels of corporate employees. They might receive additional retirement fund from their employers. They also have to face complexity when deciding the additional retirement fund products managed by the financial institution. Retirement concerns are also becoming pressures for them. The high cost of health care and running out of money are the biggest concern for them. On the other hand, the high number of investment fraud cases could harm illiterate employees who try to invest for retirement. In this research, the author examines the relationship between financial literacy and retirement planning. The module of financial literacy and retirement planning is designed for this research adapting the previous research modules. There are several adjusted questions to adapt the condition in Indonesia. The respondents are corporate employees throughout Indonesia. This research uses convenience sampling as non-probability sampling technique in gathering the data. There are 665 collected respondents, and the data is processed using the Ordinary Least Square (OLS) regression and Generalized Method of Moments (GMM) regression. The data is tested simultaneously and partially. The author finds that financial literacy index of corporate employees in Indonesia is 51%. Financial illiteracy occurs among elderly, lower level education, engineer education background, and lower salary level of employees. The author also finds that there is positive and significant relationship of sophisticated financial literacy to retirement planning. Corporate employees who have higher sophisticated financial literacy are more likely to plan for retirement. Less likeliness to plan for retirement occurs among higher basic financial literacy, women, younger, non-engineer education background, non-financial institution retirement fund, high level salary, and no having children employees. The author also finds that there is no endogeneity problem in the research model between financial literacy and retirement planning. The author believes that government institutions and also corporations are the critical parties who could help to increase financial literacy and create awareness of retirement planning.