Retirement Preparedness and Financial Literacy in Singapore: How Do the Self-Employed Compare?

35 Pages Posted: 12 Feb 2020

See all articles by Benedict S. Koh

Benedict S. Koh

Singapore Management University - Lee Kong Chian School of Business

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

Date Written: January 22, 2019

Abstract

Policymaker and media attention has recently focused on the rise of the so-called “gig” or freelance employment sector, where workers lack formal long-term relationships with one specific firm. This topic has captured public interest partly because of concern that those engaged in nontraditional work arrangements may lack the opportunity to save in formal retirement plans. This paper examines how the self-employed in Singapore compare to regular employees as well as the unemployed in terms of retirement preparedness, retirement saving, and portfolio diversification. We also investigate the extent to which differences in financial literacy can account for the different behaviors across types of workers. Overall, we find that the self-employed and employees save and invest remarkably similarly. Financial literacy is quite important: respondents scoring one additional correct answer on the FinLit questions have about 3% more net financial wealth, 2% more nonhousing net wealth, and 14% more total wealth than their less savvy counterparts. More financially literate individuals also hold better diversified portfolios over the life cycle.

Keywords: gig economy, financial literacy, investment, household portfolios, pension, Central Provident Fund, retirement, saving

JEL Classification: D14, E21, G11, J32

Suggested Citation

Koh, Benedict S. and Mitchell, Olivia S., Retirement Preparedness and Financial Literacy in Singapore: How Do the Self-Employed Compare? (January 22, 2019). Wharton Pension Research Council Working Paper No. 2019-01. Available at SSRN: https://ssrn.com/abstract=3535917 or http://dx.doi.org/10.2139/ssrn.3535917

Benedict S. Koh (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Olivia S. Mitchell

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

University of Pennsylvania - The Wharton School, Pension Research Council ( email )

3302 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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