Effect of Financial Literacy on Retirement Preparedness among Employees in the Insurance Sector in Kenya

Abstract

The failure to comprehend financial matters has been considered the main reason behind retirement problems faced by many individuals. Insurance firms being dominant private player in retirement; the universal assumption is that its’ employees have more knowledge of the pension systems and how it affects them. It is equally assumed that these employees are perfectly informed and rely on accurate knowledge regarding their likely retirement benefits and consumption needs and therefore able to arrive at an optimal savings decisions and make better choices for their retirement. This study dissipates this notion after investigating the effect of financial literacy on retirement planning by employees in the insurance sector in Kenya. Using explanatory research design, the study employed stratified proportionate random sampling method to select the respondents. Data was collected using questionnaires and analysed by use of one way ANOVA and Pearson correlational analysis. Hypotheses were tested by use of both, multiple linear regression and multinomial logistic regression. The study reveals that financial literacy has no significant effect on retirement preparedness. This finding offers great insights and implication in policy making for both the government and institutions reforms.