Financial Literacy and Retirement Planning: Evidence from Puerto Rico

Abstract

This study evaluates knowledge regarding financial and retirement planning in Puerto Rico. Most people seem to be unprepared to take charge of financial decisions and retirement. Lusardi and Mitchell (2006) study shows that many households are unfamiliar with even the most basic economic concepts needed to make savings and investment decisions. This study uses a questionnaire to evaluate financial knowledge and retirement planning in Puerto Rico. For the most part, this questionnaire was developed using Lusardi and Mitchell (2007, 2001a, 2011b) questionnaires. The results suggest a lack of knowledge in these matters; although respondents answered they get informed about financial and retirement matters. Most of them state they prepare a household budget but results suggest they do not use them appropriately. Many respondents are unfamiliar with even the most basic economic concepts needed to make savings and investment decisions. When asked about retirement, near 60 percent have tried to estimate the amount needed for retirement but less than 50 percent of them have tried to design a plan for their retirement. Of those who have made plans, less than 40 percent have met their goals and only 14 percent are very confident that they will have enough resources at retirement.

Keywords: Retirement Planning, Financial Literacy

JEL Classification: D140, J260