Trust and Retirement Preparedness: Evidence from Singapore

39 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)

Joelle H. Fong

National University of Singapore

Date Written: February 8, 2019

Abstract

Trust is an essential component of the financial system, and distrust can undermine saving and economic growth. Accordingly, prior research has shown that survey responses to a question about ‘trust in people’ are associated with household willingness to invest in the stock market. Nevertheless, little is known about how trust shapes economic behaviors predictive of retirement preparedness. Our study draws on the Singapore Life Panel (SLP®), a high-frequency internet survey of people age 50-70, to assess how trust ties to older respondents’

(1) pension plan participation and withdrawals;

(2) life, health and long-term care insurance purchases; and

(3) stock market engagement.

We show that the ‘trust in people’ question often used in prior studies is uncorrelated with household behaviors related to retirement preparedness. Nevertheless, trust in financial and public-sector representatives is positively associated with pension savings, investments, and insurance purchases. Financial literacy also has a consistent and important role in explaining who saves for retirement and other economic behaviors driving retirement readiness.

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

JEL Classification: D14, E21, G11, J32

Suggested Citation

Koh, Benedict S. and Mitchell, Olivia S. and Fong, Joelle H., Trust and Retirement Preparedness: Evidence from Singapore (February 8, 2019). Wharton Pension Research Council Working Paper No. 2019-03. Available at SSRN: https://ssrn.com/abstract=3535919 or http://dx.doi.org/10.2139/ssrn.3535919

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

Joelle H. Fong

National University of Singapore ( email )

469C BUKIT TIMAH ROAD, LKYSPP
SINGAPORE, Singapore 259771
Singapore

HOME PAGE: http://https://lkyspp.nus.edu.sg/our-people/faculty/fong-hung-yee-joelle

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