Analyzing the Sources of Older People’s Self-Dependency and Overall Financial Wellness in Four Asian Countries and the United States

Abstract

Our paper examines the financial preparedness of near-retirement individuals across five countries: the United States, Japan, and the Republic of Korea (developed economies) and the People’s Republic of China and India (developing economies). It focuses on four channels of retirement support: intra-family transfers, self-managed assets, private pensions, and public pensions, with an emphasis on self-dependency and willingness to hold risky assets. We develop two measures of preparedness—wealth-based and consumption-based—which assess the resources available to individuals near retirement. We find that, while wealth-based and, generally, consumption-based preparedness tends to be significantly higher in the more developed countries, self-dependency measures are higher in the developing countries, particularly in rural areas, where public pensions play a smaller role. Our regression analysis reveals that education, health, and prior wealth are key factors influencing individual preparedness through investments in risky assets. The paper concludes with policy recommendations for enhancing retirement preparedness in both developed and developing economies.

Keywords: later-life financial preparedness, public pensions, human capital, self-dependency, asset management

JEL Classification: J14, J32, H55