Abstract:
Purpose: Retirement planning has been declining rapidly all over the world due to the shift of self-funding mechanisms, such as moving from a Defined Benefit (DB) plan to the Defined Contribution (DC) plan, where individuals are required to manage their own financial wealth. Due to this rapid shift, there has been an increase in demand for financial advisors to assist individuals with decision-making and explain complex financial concepts with the perception of guiding households to build their retirement wealth.
The aim of the study is to examine the relationship between retirement planning and financial advice as a predictor for retirement adequacy to determine if the latter will have any influence in helping South Africans be financially independent when they retire.
This study was compelled by the fact that no or limited prior studies have been conducted in the South African context on the relationship between financial advice and retirement planning.
Design/methodology/approach: In order to investigate the relationship and influence of financial advice on retirement planning, a South African Social Attitudes Survey that was conducted in 2011 by the Human Sciences Research Council was used.
The chi-square and the logistic regression statistical techniques were applied to test the study hypotheses using the data from the survey. The following hypotheses were included:
H0: There is no relationship between retirement planning and financial advice.
H1: There is a relationship between retirement planning and financial advice.
H0: There is no relationship between socio-demographics and retirement planning.
H2: There is a relationship between socio-demographics and retirement planning.
H0: There is no relationship between socio-demographics and financial advice.
H3: There is a relationship between socio-demographics and financial advice.
Findings: The results indicate that there is a positive relationship between retirement planning and financial advice. The more individuals seek financial advice the more they tend to adequately plan for retirement.
Practical implications: In view of the strong relationship between the two variables, employers, government and institutions should prioritize making financial advice an essential part of retirement planning for employees.
