Individual Financial Planning for Retirement

Demographic shifts and behavioral changes are putting increasing pressure on today’s public pension systems. A new reality is emerging, characterized by a high level of uncertainty and a shift of responsibility to the individual. In this context the question arises whether people are assuming this responsibility and adopting adequate financial planning behavior (FPB) to secure their financial situation in retirement.

The objective of this study is to investigate individual retirement specific financial planning behavior of the German affluent segment. Specifically, this research aims for an improved understanding of individuals’ expectations regarding their life and their financial situation in retirement (FP perspectives). Furthermore, it explores how people actually carry out financial planning for retirement (FP actions) and whether their behavior corresponds to recommended principles. The study investigates whether individuals show adequate retirement-specific financial planning behavior and in which areas their behavior demonstrates limitations. Based on these findings, suggestions to improve individual retirement-specific financial planning behavior are derived for policy-makers, financial planners and the individual.

This study centers on questions of personal finance, taking into consideration elements from behavioral finance, modern portfolio theory and other research. The empirical validation is based on standardized interviews with over 500 German affluent individuals, aged 45 to 70 years. The interviewees were grouped into different investor types, based on similar fundamental characteristics implying comparable financial situations and challenges in retirement.