The Relationship between Financial Literacy and Retirement Planning among Informal Sector Workers in Randburg, South Africa

Abstract

Abstract Research background Retirement planning is viewed as one of the cornerstones of long-term household financial security. The responsibility of retirement planning has now been shifted to the individual and is no longer the responsibility of the employer. Purpose This paper examines the link between financial literacy and retirement planning among informal sector traders in the Randburg area of Johannesburg, South Africa. Research methodology A questionnaire approach was used to collect data from 269 randomly selected informal sector respondents. The data was analysed using ordinal regression. Robustness tests were executed using the Wald test. Results Findings reveal that financial literacy is linked to retirement planning, and especially with reference to informal sector workers. Additionally, education, income and the informal business sector were observed to have a positive and significant influence on retirement planning. Novelty The paper contributes to both theoretical and practical discourses on retirement planning for informal sector entrepreneurs which has not received much attention. These results are important for policy makers in retirement planning as well as curriculum development.