Financial Literacy, Savings Behavior, and Retirement Planning in Taiwan - 金融研訓院
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兩岸金融季刊 第四卷第二期（2016 年 6 月）
Financial Literacy, Savings Behavior, and
Retirement Planning in Taiwan
‧Yu-Jen Hsiao
Associate Professor of the Executive MBA Program in Biotechnology,
Taipei Medical University
‧Shih-Jie Lin*
deputy director of Financial Research Institute in Taiwan Academy of Banking
and Finance
‧Chinbat Dambaravdan
Master in the Department of Finance at National Dong Hwa University
Abstract
In this paper, we examine the relationship among financial literacy, savings behavior, and
retirement planning in Taiwan. We not only find people who are more financially knowledgeable are
more likely to plan for retirement but also find those who have stronger savings habits are more likely
to plan for retirement. In most specifications we find a stronger role for savings habits than financial
illiteracy in explaining retirement planning.
Keywords：Financial Literacy, Savings Behavior, Retirement Plan, Order logit
1. Introduction
The relationship between financial literacy and household behavior is important, as individual are
increasingly being asked to take on responsibility for their financial well-being and their retirement
preparation. In fact, many US, and Netherlands have very little savings on the verge of retirement
( Lusardi and Mitchell, 2007a; van Rooij, Lusardi and Alessie, 2011a). In Taiwan as well,1 it has
become clear that many employees hold overly pessimistic expectations about the level of their pension
benefits.2 With demographic changes toward a low birth rate and an aging society, concerning the
retirement planning has become an important issue in general.3 As to the benefits of retirement
planning to the national economy, adequate pension planning not only helps to fulfill the public's
economic needs, but also to achieve the goal of social stability. Pension also plays the role of long
term fund supplier in the financial markets, thus proper utilization of pension funds helps capital
* Shih-Jie Lin (corresponding author) is a deputy director of Financial Research Institute in Taiwan Academy of
Banking and Finance (e-mail: jerrylin@tabf.org.tw).
1蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
formation and facilitates economic development.
According to studies applying data of developed countries such as US, Germany and Netherlands,
we know that financial literacy is a key factor affecting how the public can achieve adequate retirement
planning (Bucher-Koenen and Lusardi, 2011；Lusardi and Mitchell, 2011a；van Rooij, Lusardi, and
Alessie, 2011a). That means if a household does not possess proficiency in making good financial
decisions, it could be short sighted and lead to insufficient retirement planning (OECD, 2005).
Recently, Hsiao, Chen and Liao (2016) use Taiwan’s data to show that the financial literacy has a
positively significant impact on retirement planning which are consistent with those in developed
countries (Bucher-Koenen and Lusardi, 2011; Dvorak and Hanley, 2010; Lusardi and Mitchell, 2007a,
2007b, 2011a；van Rooij, Lusardi and Alessie, 2011a). In other words, the Taiwanese public with more
proficient financial literacy is more likely to have sufficient retirement planning.
However, a low level of financial literacy does not necessarily imply that people are bound to
make poor retirement planning. At least in principle, they have higher saving rate. As long as
households can resort to the saving habit for their retirement planning, thus avoiding can act as a
substitute for their own learning. In this paper, we not only find people who are more financially
knowledgeable are more likely to plan for retirement, but also find those who have stronger savings
habits are more likely to plan for retirement. In most specifications we find a stronger role for savings
habits than financial illiteracy in explaining retirement planning.
The outline of the paper is as follows. We review literature on financial literacy survey and
retirement planning in Section 2. Section 3 illustrates pension arrangements in Taiwan. Section 4
illustrates data, financial literacy measurement and empirical method. We present the empirical results
and analysis in Section 5and section 6 concludes.
2. Literature Review
Previous studies show that even for workers on the edge of retirement, their retirement planning is
still far beyond adequate (Lusardi and Mitchell, 2007b). With difference in factors such as restrictions
of wealth and income, discount rate, joining in social retirement planning and financial literacy,
households show significant divergence in the need of pension (Ameriks, Caplina and Leahy, 2003；
Bernheim, Skinner and Weinberg, 2001 ； Lusardi and Mitchell, 2007a ； Saez, 2009 and Scholz,
2兩岸金融季刊 第四卷第二期（2016 年 6 月）
Seshardi and Khitatrakun, 2006). Similarly, households reveal that concern over retirement planning
vary according to the level of household wealth (Ameriks et al., 2003；Lusardi and Mitchell, 2007a,
2007b). Lusardi and Mitchell (2007a) prove that while controlling the social-economic characteristics
of income and education background, people who have retirement planning also have more wealth, but
those who have good fortune do not certainly have proper retirement planning.
Binswanger and Carman (2012) argue that the means to prepare pension is also a factor that
influences retirement planning. They discovered that people who depend on rule of thumb to conduct
retirement planning excel against those who do not apply any systematic manner at all. Aggarwal and
Goodell (2013) find that except for major policy, institutional and social factors, the role that females
play in economy, society, religion and culture also show significant positive impact on the development
of pension systems in these countries. Cocco and Gomes (2012) discuss it under life cycle theory with a
tendency of extended expected life. The result shows that the rational strategies for people to counter
longevity risk are to increase the holdings of savings and financial assets and also to extend the age of
retirement; that is to say, investment portfolio and insurance will affect wealth accumulation, and
further counter longevity risk. Mastrobuoni (2011) argue that the Social Security Statement in US since
1995 is helpful to workers to enhance their knowledge about their own benefits, but is not helpful in
improving their retirement behavior. Seligman and Bose (2012) discovered that by actively managing
pension accounts and attending seminars for financial education, the portfolio allocation of households
and wealth accumulation would both be improved.
Many previous studies suggest that workers in the United States are lacking of pension related
knowledge (Bernheim and Levin, 1989；Chan and Stevens, 2008). Lusardi and Mitchell (2007a, 2007b,
2011b) and also argue that people with lower financial literacy do not have relatively sound retirement
planning, while they also do not conduct savings and wealth management according to their retirement
planning. In contrary, people with higher financial literacy would engage more in retirement planning,
stock investing and practical borrowing behavior (Lusardi, 2008). Aside from empirical studies in the
United States, a study using data from the Netherlands argues that there is a significantly positive
relationship between financial literacy and retirement planning (van Rooij et al., 2011a). Dvorak and
Hanley (2010) find that participants show fairly good knowledge of the basic mechanics of the plan, but
are unable to differentiate among various investment options. Empirical study proves that people with
3蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
higher financial literacy are keen to engage in risky commodity investment but they also show better
retirement planning, thus there is a significant positive correlation between financial literacy and
household wealth (van Rooij, Lusardi and Alessie, 2012). Russian data reveals similar findings and
conclusions (Klapper and Panos, 2011). Recently, Hsiao, Chen, and Liao (2016) collect data from
Taiwan and find that people with a higher financial literacy tend to have more diversified fund sources
for retirement planning.
3. Pension Arrangements in Taiwan4
The aim of Labor Pension in Taiwan according to the Labor Pension Act 5 is to enhance the
protection of workers' lives after retirement, strengthening the relationships between workers and
employers and promoting social and economic development. Under the Act, all employers are required
to deposit 6% (or more) of a worker's monthly wages into an individual labor pension account managed
by the Bureau of Labor Insurance, with ownership going to the worker. Business entities employing 200
or more workers shall decide through their respective labor unions whether to adopt an annuity
insurance program.If no labor unions exists,with the approval obtained through a labor-management
meeting and the central competent(the Ministry of Labor), a business entity may take out an annuity
insurance that complies with the Insurance Act on behalf of those workers who choose, in writing, to
take out an annuity insurance. Workers adopting the new pension system may begin accumulating their
pension accounts as their employers contribute to them. The accounts are portable and will be retained
even if workers switch jobs or if business entities shut down or cease operations.
Under the pension system, in addition to the mandatory employers' contribution, workers may
contribute voluntarily additional sums, maximum 6% of their monthly wages to their pension accounts.
For those who contribute beyond the required amount, the extra contributions may be tax deducted from
their total annual income. A worker may begin collecting his or her pension payments upon reaching the
age of 60, regardless of employment status. Workers with 15 years or more work seniority can receive
monthly pension payments. Workers with less than 15 years of seniority can only receive a lump sum
payment.For the purpose of this Act, the authorities are Ministry of Labor at the central government
level, municipal city governments at the municipal city level, and county/city governments at the
county/city level.6
4兩岸金融季刊 第四卷第二期（2016 年 6 月）
4. Data and Variable Measures
4.1 Data Sources
In this study, we use data derived from the National Financial Literacy Survey conducted by
Taiwan Financial Supervisory Commission (FSC) in 2007, 2009 and 2011.7 For the research purpose,
the representative sample comprised people over 40 years old. After deleting observations that did not
report on retirement planning or with missing values, the resulting data set had a sample size of 3,365.
4.2 Measurement of Retirement Plan Levels
In this research, we employ the results of Question which is a multiple choice question that
surveys the sources of the respondent's pension funding. If the respondent's answer contains any of
8
the three: no planning, not sure or engage in derivatives investment, we define this respondent as low
retirement planning; if the answer contains only one of the following: firm pension fund, labor
insurance, public servant insurance or savings (bank savings or rotating savings, we define as middle
retirement planning; if the answers contain one of those of middle retirement planning but also contain
buying bond, stocks, mutual funds or endowment insurance, we define as high retirement planning.
4.3 Measurement of Financial Literacy
So far, there is no standard measurement of financial literacy. For example, for the number of
questions in their financial literacy questionnaire, Lusardi and Mitchell (2007a, 2008) designed three
questions, but Stango and Zitman (2009) asked only one. Other studies employ factor analysis to further
divide into basic financial literacy and advanced financial literacy (van Rooij, Lusardi and Alessie,
2011b), these questionnaires includes questions on the concepts of compounded interest rate, inflation,
diversification and the features of stocks and bonds. Lusardi and Mitchell (2007b) conclude the way of
measuring financial literacy in different countries. There is also a research reviewing papers in the last
decade and argue that the surveys of financial literacy should cover basic knowledge (eg: time value of
money), knowledge of credit loans, knowledge of savings and investment and knowledge of insurance.
In this research, we designed nine different questions to measure financial literacy. Respondent scores
were calculated according to the answers provided, where a correct answer was scored one and an
incorrect answer was scored zero; thus, the highest attainable score was nine and the lowest was zero.
5蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
Table 1 shows the overall performance of the respondents. Panel A reports the exact wording of
the nine questions. Panel B shows the number of correct answers for the entire sample. The respondents
knew about some economic concepts; however, no one correctly answered all nine questions.
Table 1. Financial literacy
Panel A reports the proportions of interviewees providing correct and incorrect answers to each of
the nine questions. Panel B reports the distribution of the number of correct answers on the nine literacy
questions. The data are from the 2007, 2009, and 2011 Financial Supervisory Commission survey.
Panel A: financial literacy (N=3,365)
Correct Incorrect
Q1: In case of interest rate on the decline, what’s supposed to be chosen when 56.1% 43.9%
handling fixed deposits?
Q2: In case that the borrowing customers provide collaterals for the mortgage, then 40.7% 59.3%
the applicable borrowing rate is normally higher than the borrowing rates
without collateral?
Q3: The “index” contained in the “index mortgage” of self-occupied house is 26.8% 73.2%
referred to as “capitalization weighted stock index”?
Q4: When adopting "installment" to buy cars, the total expenditure is usually 74.1% 25.9%
Higher than the total expenditure through "cash pay"?
Q5: A person can cope with the risks of birth, senility, illness and death by means of 19.0% 81.0%
insurance?
Q6: Purchasing insurance can reduce the risk of life, so the purchasing amount is 5.3% 94.7%
higher, than the better?
Q7: As there is universal coverage, so no other extra medical insurance is needed to 38.8% 61.2%
be no need to be covered?
Q8: What’s your opinion about the relationship between risks on the stock market 70.3% 29.7%
and remunerations; is it that the investment with higher returns would be
normally accompanied with greater risks?
Q9: What changes would occur to the bond prices in case of interest rates rising? 29.7% 70.3%
Panel B: Summary of responses (N=3365)
Number of correct (out of nine questions)
None 1 2 3 4 5 6 7 8 All
Correct 80 334 439 685 785 634 284 124 0 0
6兩岸金融季刊 第四卷第二期（2016 年 6 月）
4.4 Measurement of Savings Behavior
To assess the empirical evidence for savings behavior, we tried to clarify who had satisfactory
family savings behavior. The wording of the question in the survey was as follows:
What is the proportion of money used for saving from the annual revenues of your family?
The family savings behavior (Family savings behavior_d) was measured by a binary variable as
follows:
Family savings behavior_d=1 The proportion of money used for saving from the annual
revenues of your family is larger than 20%.
Family savings behavior_d=0 The proportion of money used for saving from the annual
revenues of your family is less than 20%.
Similarly, we tried to clarify who had satisfactory personal bonus savings behavior. The wording of the
question in the survey was as follows:
If you have a nonrecurring additional income, such as a year-end bonus or employee bonuses, what is
the savings ratio?
The personal bonus savings behavior (Personal savings behavior_d) was measured by a binary variable
as follows:
Personal savings behavior_d=1 For a nonrecurring additional income, such as a year-end
bonus or employee bonuses, the savings ratio is higher than
20%.
Personal savings behavior_d=0 For a nonrecurring additional income, such as a year-end
bonus or employee bonuses, the savings ratio is lower than
20%.
4.5 Control Variables
Our survey questions are linked to a rich set of data on demographic characteristics, such as age,
gender, marital status, educational, background, living area, work status, and average annual household
7蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
income. The age are categorized: 40-49 years, 50-59years and above 60 years old. Only one category
can be selected: The selected category is defined as 1, and the unselected category is defined as 0. The
variable MALE is a dummy variable that equals one if the respondent is female and zero if the
respondent is male, and variable Married is a dummy variable that equals one if the respondent is
married included those who were separated or widowed and zero if the respondent is unmarried
comprised respondents who were divorced or Cohabitation. The education are categorized: below
senior high school, university and above graduate school. Only one category can be selected: The
selected category is defined as 1, and the unselected category is defined as 0. The variable Urban is a
dummy variable that equals one if the respondent live in urban and zero if the respondent live in rural.
The variable Taiwanese People is also a dummy variable. The work status are categorized: working full
time, temporary worker and retired. Only one category can be selected: The selected category is defined
as 1, and the unselected category is defined as 0. Finally, the variables average annual household
income are categorized: below NTD 660,000, NTD660,000-1,230,000 and above NTD 1,230,000. Only
one category can be selected: The selected category is defined as 1, and the unselected category is
defined as 0.
Table 2 reports the family and personal savings behavior of the respondents. The percentage of
respondents who have family saving behavior is only 26.70% and the percentage of respondents who
have personal saving behavior is 27.20%.
Table 2. Responses to savings control statements
This table reports the proportions of interviewees providing savings control statements to each of
the two questions. The data are from the 2007, 2009, and 2011 Financial Supervisory Commission
survey.
Saving behavior Yes No
Family saving behavior: The proportion of money used for saving against annual
26.7% 73.3%
revenues of your family would larger than 20%
Personal bonus saving behavior: If you have a non-recurring additional incomes
such as year-end bonus or bonuses for employees the saving ratio would be larger 27.2% 72.8%
than 20%
8兩岸金融季刊 第四卷第二期（2016 年 6 月）
4.6 Regression Model
We used the following ordered logit model with the sample selection:9
P( Ai 1) ( ' X i )
P ( Ai 2) (k1 ' X i ) ( ' X i ) …………………………………………………...…….(1)
P( Ai 3) 1 2 (k1 ' X i )
where Ai presents the level of retirement planning level (i.e., Ai 1 for no experience, Ai 2
for medium experience, Ai 3 for high experience). is the probability density function for the
logistic distribution. is a vector of parameters and k1 is the threshold parameter. X i is a vector of
explanatory variables that includes financial literacy, saving behavior and sociodemographic controls
(age, gender, marital status, educational background, living area, work status, and average annual
household income).
5. Empirical Results
5.1 Overview of Retirement Planning
To examine the relationship between retirement planning and personal features, we take features
such as age, gender, marriage status, education, living area, family background, profession, personal
and household annual average income, and financial literacy into consideration to observe the level of
retirement planning of different groups of public. In Panel A of Table 3 shows the distribution of
retirement planning of different groups; we can easily find out that people with higher level of
retirement planning are concentrated between ages of 40-49. This illustrates that people in the prime
age notice that it is not enough to depend solely on national social benefits to cover retirement living
expenses. Previous empirical studies suggest that older female relative to male do not have complete
retirement planning (Lusardi and Mitchell, 2008); however, in our study, the ratio of female with high
retirement planning (14.2%) is slightly higher than that of male (9.6%), this finding is not consistent to
the result in advanced countries. Third, as respondents with higher education, their level of retirement
planning are also higher. Fourth, the differences between those who live in urban areas compared to
9蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
those in rural areas are not significant. Fifth, the ratio of the Aboriginal group classified as high
retirement planning is only 0.4%. Sixth, people who have a full time job are more likely to have high
retirement planning. Finally, the second highest group of respondents in terms of personal and family
average annual income shows higher ratios of high retirement planning compared to the group of
highest average annual income. The result indicates that people with the highest income level might not
worry about financial scarcity and thus their level of retirement planning does not correspond with
income. This finding is similar to the result of empirical study made by Lusardi and Mitchell (2007a),
they assumed that people who have enough wealth do not necessarily engage in retirement planning. Te
last but not the least finding in this study is that respondents with higher financial literacy show higher
levels of retirement planning in Panel B of Table 3. Panel C of Table 3 divides savings behavior into
family and personal savings behavior. The first row of family (personal) savings behavior represents
savings of less than 20% of the “extra income”; the second row represents savings of higher than 20%.
Table 3. Demographic, financial literacy, and savings behavior characteristics for
retirement planning
A marital status of single includes respondents who were divorced or living with their significant
other, and married includes people who were separated or widowed.
Panel A Demographic
Low level Middle level High level
Age
40-49 2.7% 26.4% 13.5%
50-59 2.6% 21.3% 7%
60 above 1.6% 21.6% 3.4%
Gender
Male 2.5% 31.6% 9.6%
Female 4.4% 37.7% 14.2%
Status
Married 5.4% 56.9% 20.0%
Unmarried 1.5% 12.4% 3.9%
Education
Below senior high school 6.1% 61.5% 17.4%
University 0.6% 6.3% 4.7%
Above graduate school 0.2% 1.6% 1.8%
10兩岸金融季刊 第四卷第二期（2016 年 6 月）
Living Area
Urban 5.0% 46.1% 17.6%
Rural 1.9% 23.2% 6.2%
Background
Taiwanese People 6.5% 67.6% 23.4%
Aboriginal 0.4% 1.7% 0.4%
Work status
Working full time 2.6% 35.5% 16.9%
Temporary worker 0.5% 3.4% 1.6%
Retired 0.6% 11.6% 1.4%
Others 3.1% 18.8% 3.8%
Family annual average income
Below NTD 660,000 3.6% 30.4% 4.8%
NTD660,000-1,230,000 2.4% 28.6% 10.8%
≥ NTD 1,230,000 0.9% 10.5% 8.3%
Panel B Financial literacy
None 0.5% 1.9% 0.0%
1 1.7% 7.7% 0.5%
2 1.3% 10.8% 1.0%
3 1.2% 15.0% 4.2%
4 0.9% 16.9% 5.5%
5 0.7% 10.8% 7.4%
6 0.5% 4.3% 3.6%
7 0.1% 1.9% 1.7%
8 0.0% 0.0% 0.0%
All 0.0% 0.0% 0.0%
Panel C Saving behavior
Family saving behavior
Less than 20% 5.7% 54.4% 13.5%
Large than 20% 1.2% 15% 10.5%
Personal saving behavior
Less than 20% 5.5% 54.3% 12.9%
Large than 20% 1.4% 15% 11%
5.2 The Relationship Between Financial Literacy, Saving Behavior and Retirement
Planning
After observing the level of retirement planning of groups with different features, we employ
Order Logit regression model in this study to examine the relationship between the level of financial
literacy and retirement planning10. First of all, we analyze the influence of personal featured variables
11蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
without the variable of financial literacy to the level of retirement planning; the results are in Model (1)
of Table 4. Empirical evidence shows that education background, family background, working status
and average annual household income do have significant influence on respondent's level of retirement
planning. People with higher education and average annual household income tend to have higher levels
of retirement planning. In Model (2) of Table 4, we show the result of adding in the variable of financial
literacy. The result suggest that even after controlling the personal featured variables of Model (1), the
variable of financial literacy in Model (2) does have significantly positive impact on people's retirement
planning. That is to say, people with higher financial literacy are more likely to have more diversified
retirement planning than only depend on social insurance/ annuity. This finding is correspondent to the
empirical result of developed countries (Dvorak and Hanley, 2010; Lusardi and Mitchell, 2007a,
2007b, 2011b；van Rooij, Lusardi and Alessie, 2011a; Hsiao et al., 2016) and illustrates that a person's
financial literacy is a key factor affecting the level of retirement planning in Taiwan. According to
Model (3) and Model (4) of Table 4, the coefficient of family savings behavior and personal savings
behavior are both significantly positive, suggesting that people with a well savings behavior are more
likely to have more diversified retirement planning. In other words, person's saving behavior is also a
key factor affecting the level of retirement planning in Taiwan.
Table 5 show that family savings behavior and financial literacy are still strong determinants of
retirement planning levels when they both include into the model. However, we find a stronger role
for savings habits than financial illiteracy in explaining retirement planning. The coefficient of savings
habits is significantly larger than the coefficient of financial literacy. Notably, one of the variables that
is missing from our empirical specification is a measure of risk tolerance. Financial risk tolerance is an
import factor in the financial planning. To control for risk tolerance, we created a dummy variable, risk
aversion attitude, which equals one for risk-averse respondents that only invest in deposits and zero
otherwise.11 When risk aversion was included in the model we found that both the ordered logit (Model
3) and ordered logit model (Model 4) estimates of the basic financial literacy index remained
significantly positive (Table 5). Thus, the inclusion of risk aversion still supports our argument that
financial literacy and saving behavior are positively related to retirement planning.
12兩岸金融季刊 第四卷第二期（2016 年 6 月）
Table 4. Baseline model
Model (1) Model(2) Model(3) Model(4)
Par. Z-stat. Par. Z-stat. Par. Z-stat. Par. z-stat.
Financial literacy 0.378*** 13.98
Family saving behavior_d 0.743*** 8.37
Personal saving behavior_d 0.794*** 8.88
Age (Base group: 60 years and older)
40~50 years 0.332** 2.77 0.137** 1.13 0.351** 2.91 0.372** 3.08
50~60 years 0.073 0.64 -0.034 -0.29 0.094 0.82 0.083 0.72
Male -0.298*** -3.62 -0.034*** -3.76 -0.270** -3.25 -0.235 -3.41
Married -0.007 -0.08 -0.0416 -0.40 0.019 0.19 -0.015 -0.15
Education (Base group: Below senior high school)
University 0.640*** 5.29 0.461*** 3.72 0.624*** 5.12 0.581*** 4.75
Above graduate school 0.793*** 3.88 0.615*** 2.94 0.809*** 3.92 0.762*** 3.68
Urban 0.120 1.44 0.095 1.12 0.127 1.51 0.125 1.49
Taiwanese People 0.538** 2.09 0.424** 1.65 0.509** 1.96 0.545** 2.10
Profession (Base group: Other)
Working full time 0.546** 4.77 0.467** 4.04 0.500** 4.33 0.494** 4.28
Temporary worker 0.842*** 4.55 1.037*** 5.49 0.788*** 4.24 0.795*** 4.29
Retired 0.101 0.71 0.068 0.47 0.041 0.28 0.104 0.73
Family annual average income (Base group: Below NTD 660,000)
NTD660,000-1,230,000 0.561*** 5.98 0.414*** 4.35 0.461*** 4.85 0.452*** 4.76
≥ NTD 1,230,000 1.159*** 10.03 0.881*** 7.42 0.932*** 7.82 0.927*** 7.79
Year 2009 -0.248 -2.67 -0.203 -2.13 -0.247 -2.64 -0.285 -3.03
Year 2011 -0.917 -9.20 -0.929 -9.21 -0.922 -9.18 -0.985 -9.77
Pseudo R-square(%) 8.33 12.28 9.67 9.84
Log likelihood -2405.3 -2301.8 -2370.3 -2365.7
Note: Unmarried included: Divorce and Cohabitation; Married included: Separated and Widowed. Others in
profession included: Domestic homemaker, Temporary workers and Unemployment and for some reason or
patients unable to work. ***, **, and * indicate significance at the 1%, 5% and 10% levels, respectively.
13蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
Table 5. Order logit regression analysis of financial literacy, savings behavior and
retirement planning
Model (1) Model(2) Model(3) Model(4)
Par. Z-stat. Par. Z-stat. Par. Z-stat. Par. z-stat.
Financial literacy 0.367*** 13.45 0.356*** 12.99 0.348*** 12.60 0.339*** 12.19
Rrisk aversion attitude -0.609*** -5.51 -0.600*** -5.43
Family saving behavior_d 7.35 0.632*** 6.98
0.663***
Personal saving behavior_d 0.641*** 7.02 0.601*** 6.55
Age (Base group: 60 years and older)
Age dummy (40~50) 0.152 1.27 0.162 1.36 0.100 0.82 0.111 0.91
Age dummy (50~60) -0.016 -0.14 -0.034 -0.30 -0.039 -0.33 -0.057 -0.49
Male -0.289*** -3.57 -0.292*** -3.61 -0.268*** -3.27 -0.271*** -3.30
Married -0.013 -0.13 -0.046 -0.44 -0.047 -0.44 -0.080 -0.75
Education (Base group: Below Vocational school)
University 0.455*** 3.66 0.429*** 3.44 0.450*** 3.61 0.427*** 3.42
Above graduate school 0.629*** 3.00 0.598 2.83 0.585*** 2.79 0.555*** 2.63
Urban 0.103 1.20 0.102 1.19 0.098 1.14 0.098 1.13
Taiwanese People 0.399 1.54 0.433 1.67 0.406 1.53 0.444 1.67
Profession (Base group: Other)
Working full time 0.426*** 4.01 0.410*** 3.86 0.419*** 3.89 0.406*** 3.07
Temporary worker 0.981*** 5.37 0.966*** 5.24 0.998*** 5.42 0.984*** 5.34
Retired 0.061 0.92 0.067 0.84 0.047 0.67 0.045 0.51
Family annual average income (Base group: Below NTD 660,000)
NTD660,000-1,230,000 0.334*** 3.48 0.340*** 3.54 0.305*** 3.12 0.311*** 3.19
≥ NTD 1,230,000 0.693*** 5.69 0.711*** 5.85 0.612*** 4.98 0.631*** 5.15
Year 2009 -0.203** -2.12 -0.233** -2.43 -0.196** -2.03 -0.225** -2.33
Year 2011 -0.932*** -9.20 -0.985*** -9.68 -0.809*** -7.87 -0.859*** -8.30
Pseudo R-square(%) 13.31 13.22 13.43 13.32
Log likelihood -2274.9 -2277.2 -2216.4 -2219.3
Note: Unmarried included: Divorce and Cohabitation; Married included: Separated and Widowed. Others in
profession included: Domestic homemaker, Temporary workers and Unemployment and for some reason or
patients unable to work. ***, **, and * indicate significance at the 1%, 5% and 10% levels, respectively.
5.3 Robustness test
Besdies, all retirement planning, financial literacy, and savings behavior might be correlated with
family income level. Higher income level might results in higher level of financial literacy, savings, and
14兩岸金融季刊 第四卷第二期（2016 年 6 月）
retirement planning. The positive and significant relationship between retirement planning and financial
literacy in Table 5 might be caused by income level. Similarly, the positive and significant relationship
between retirement planning and savings behavior in the same table might be also caused by income
level. To resolve these common cause problems, we split the total samples into different income level
groups and re-estimate the models in Table 5 for each income group to check the robustness of the
results. Table 6 represents the results of this robustness test. Once again, financial literacy and saving
behavior are positively related to retirement planning into different income level groups. The results of
robustness test are consistent with and supportive of the empirical evidence in Table 5.
Table 6. Robustness Test: Order logit regression analysis of financial literacy, savings
behavior and retirement planning into different income level groups.
Model (1) Model(2)
Panel A: Family Income Low (Less than NTD660,000)
Par. Z-stat. Par. Z-stat.
Financial literacy 0.453*** 9.42 0.458*** 9.51
Family saving behavior_d 0.611*** 3.10
Personal saving behavior_d 0.478** 2.39
Control Variables Yes Yes
Observations 1306 1306
Pseudo R-square 14.78 14.56
Log likelihood -751.56 -753.52
Panel B: Family Income Middle (NTD660,000-1,230,000)
Financial literacy 0.392*** 8.96 0.385*** 8.80
Family saving behavior_d 0.494*** 3.78
Personal saving behavior_d 0.479*** 2.76
Control Variables Yes Yes
Observations 1401 1401
Pseudo R-square 10.81 10.78
Log likelihood -964.52 -964.93
Panel C: Family Income High (larger than NTD 1,230,000)
Financial literacy 0.295*** 5.13 0.249*** 4.22
Family saving behavior_d 0.716*** 4.22
Personal saving behavior_d 0.816*** 4.65
Control Variables Yes Yes
Observations 658 658
Pseudo R-square 10.85 11.21
Log likelihood -488.65 -486.69
Note: ***, **, and * indicate significance at the 1%, 5% and 10% levels, respectively.
15蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
6. Conclusions
As the trend grows towards an aging society with low birth rate, retirement planning is receiving
worldwide attention. As a result, in this study we examine how financial literacy and saving behavior
affects retirement planning and analyze the difference in retirement planning between respondents with
different characteristics. According to the empirical findings from 3,365 respondents above the age of
40 in the three years National Financial Literacy Survey, we find a strong, positive relationship between
financial literacy and retirement planning; people who are more financially knowledgeable are more
likely to plan for retirement. We also find a strong, positive relationship between savings behavior and
retirement planning; those who have stronger savings habits are more likely to plan for retirement. In
most specifications we find a stronger role for savings habits than financial illiteracy in explaining
retirement planning. While we consider personal features, we find that females and households
classified as average annual income are more active engaging in retirement planning.
Footnotes
1. In Oct 2012, news about Labor Pension Fund of Taiwan becoming insolvent in 2027, caused a wave
of pension fund withdrawing thereby. According to statistics from Bureau of Labor Pension,
applications for lump-sum old-age benefit amounted to more than 33 thousands on the month of
October 2012. This number is four times higher than average and becomes the second highest in
history. In 2012, retiring workers that choose lump-sum old-age benefit withdrawing NTD 76.8
billion in October and November. The magnitude of this drawing is only next to that four years ago
when the law governing labor insurance annuity was amended.
2. In late January 2013, the Pension Fund Association published “Taiwan retirement index and
retirement planning opinion poll”, this survey showed that over 60% of people are not confident in
preparing a sufficient amount of pension; half of poll participants have not even started preparing for
retirement.
3. According to a demographics study made in July 2013 by the Ministry of the Interior, the
16兩岸金融季刊 第四卷第二期（2016 年 6 月）
number of “prospective retirees” (age 55-59) in Taiwan are 1.65 million. The report named
“Republic of China population projection from 2012 to 2060” was issued by the Council for
Economic Planning and Development (now National Development Council) under
Executive Yuan in August 2012. This report shows that the elderly population will account
for more than 14% of the total population in 2018 and Taiwan will legitimately be
considered an aging society; this percentage will go beyond 20% in 2025 and will make
Taiwan an extremely aging society. The ratio will steadily climb to above 39% in 2060; by
that time, juvenile population will only account for 9.8% while the adult population will be
50.7% of total population.
4. Information on pensions can be found on the government labor force official website:
http://www.bli.gov.tw/sub.aspx?a=tHxFCdFgZ7Y%3d
5. Last modified in July 20th,2015.
6. More details can be found on the official website:http://www.bli.gov.tw/.
7. The survey allocates nationwide samples according to proportionate stratified sampling as
follows: First, the reference population in this survey is from 2010 demographic annual
report of all counties/cities in Taiwan issued by The Department of Statistics of Ministry of
the Interior and census data of age, gender and education background of Taiwanese
population. Then samples gathered from every county/city are allocated by population ratio
relative to whole nation, and samples of each stratum are determined by the relative ratio of
gender, age and education background. Thus, the samples of this survey could reflect the
characteristics of age, gender and education background in each county/city. Finally, we
take the annual income distribution in Taiwan issued by Directorate-General of Budget,
Accounting and Statistics for reference, in order to fit the samples into Taiwanese
population characteristics distribution.
8. Financial derivatives are more complex and risky than bonds and stocks. Therefore, financial
derivative is not an appropriate source of the pension funding and is defined in low level retirement
17蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
planning. However, We also conduct a robustness test by classifying financial derivatives in high
level retirement planning and the findings in Appendix Table A1 proved to be qualitatively similar.
9. See Greene (2003) for a description and discussion of the ordered logit model. We also estimated our
model by using ordered probit and ordinary least squares regressions and the findings proved to be
qualitatively similar. We do not report the results for the sake of brevity; they are available from the
authors upon request.
10. In this study, we firstly conduct correlation analysis of each variables and find that no highly
correlation between the variables. Thus, we could exclude the influence of collinearity on our study.
Besides, we also employ an Order Probit regression model to run a robustness test and get similar
findings. In order to keep this paper concise, we do not present the results of this robustness test
here.
11. The Literacy Survey also provides multiple-choice Question 9.1 for investors, which asks, “Do you
have the following investments.” The proposed choices are: (1) Current deposits; (2) Time deposits;
(3) Funds; (4) Stocks; (5) Bonds; (6) Investments in the private financial sector; (7) Insurance; (8)
Real estate; (9) Options and futures; and (10) Currency.
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關 鍵 詞
金融知識、 儲蓄行為、退休規劃、Order logit
20兩岸金融季刊 第四卷第二期（2016 年 6 月）
Appendix Table A1 Robustness : Measurement of Retirement Plan Levels
Model(1) Model(2)
Par. Z-stat. Par. Z-stat.
Financial literacy 0.376*** 13.27 0.368*** 12.93
Rrisk aversion attitude -0.736*** -6.32 -0.734*** -6.31
Family saving behavior_d 0.642*** 7.07
Personal saving behavior_d 0.530*** 5.77
Age (Base group: 60 years and older)
Age dummy (40~50) 0.190 1.52 0.195 1.57
Age dummy (50~60) -0.023 -0.20 -0.043 -0.36
Male -0.259*** -3.11 -0.262*** -3.14
Married -0.141 -1.29 -0.174 -1.61
Education (Base group: Below Vocational school)
University 0.476*** 3.85 0.463*** 3.74
Above graduate school 0.601*** 2.88 0.581*** 2.77
Urban 0.096 1.09 0.093 1.06
Taiwanese People 0.537* 1.90 0.568** 2.01
Profession (Base group: Other)
Working full time 0.323*** 2.96 0.312*** 2.86
Temporary worker 0.844*** 4.46 0.834*** 4.41
Retired 0.029 0.28 0.043 0.37
Family annual average income (Base group: Below NTD 660,000)
NTD660,000-1,230,000 0.439****** 4.37 0.453*** 4.52
≥ NTD 1,230,000 0.695 5.58 0.734*** 5.91
Year 2009 -0.213** -2.15 -0.239*** -2.42
Year 2011 -0.379*** -3.72 -0.418*** -4.09
Pseudo R-square(%) 14.48 14.14
Log likelihood -2119.86 -2128.26
Note: We employ the results of Question which is a multiple choice question that surveys the sources of the
respondent's pension funding. If the respondent's answer contains any of the three: no planning, not sure,
we define this respondent as low retirement planning; if the answer contains only one of the following: firm
pension fund, labor insurance, public servant insurance or savings (bank savings or rotating savings, we
define as middle retirement planning; if the answers contain one of those of middle retirement planning but
also contain buying bond, stocks, financial derivatives, mutual funds or endowment insurance, we define as
high retirement planning. Unmarried included: Divorce and Cohabitation; Married included: Separated and
Widowed. Others in profession included: Domestic homemaker, Temporary workers and Unemployment
and for some reason or patients unable to work. ***, **, and * indicate significance at the 1%, 5% and 10%
levels, respectively.
21蕭育仁、林士傑、Chinbat Dambaravdan：金融知識、儲蓄行為與退休規劃：台灣的實證結果
金融知識、儲蓄行為與退休規劃：
台灣的實證結果
‧蕭育仁
台北醫學大學生物科技高階管理碩士在職專班副教授
‧林士傑*
台灣金融研訓院副所長
‧Chinbat Dambaravdan
國立東華大學財務金融學系碩士
摘 要
本文透過金融監督管理委員會的國民金融知識問卷調查資料，採用 Order logit 探討金融知
識、儲蓄行為與退休規劃之關聯性。實證結果發現，除了金融知識愈高的台灣民眾愈容易會想要
進行退休計劃外，也發現台灣民眾具有較強的儲蓄習慣的民眾也愈可能去規劃退休生活。特別值
得注意的是，具備儲蓄習慣對於積極進行退休計劃的影響力，更勝於金融知識的程度。
* 林士傑(通訊作者:jerrylin@tabf.org.tw)，台灣金融研訓院副所長。
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