Empirical analyses of individual retirement-specific FPB

Part of the Contributions to Economics book series (CE)


This chapter describes the findings of the consumer retirement survey on individual FPB and so represents the core of the empirical analysis. In the first sub-chapter, the different investor groups with a higher or a lower risk capability than the average investor are pooled into homogenous investor types, based on similar socio-economic and socio-demographic characteristics. These investor types show statistically distinct profiles, contain a sufficiently high number of individuals and so avoid an atomization of results. They are first characterized with regard to their socio-demographic and socio-economic attributes and then used as vehicles for the further empirical analyses. The FP perspectives of these investor types are described in sub-chapter 6.2. In sub-chapter 6.3, the effective FP actions are analyzed and compared to the principles for FP actions, set-up in the normative part of this study. Sub-chapter 6.4 then introduces a simulation to determine the existence of a retirement gap and the resultant required saving rate for the individual investor types. Furthermore, it discusses different scenarios as to when the financial assets of an individual are ebbing out or which levers individuals can pull to improve the outlook of their financial situation in retirement.


Mutual Fund Saving Rate Financial Planning Financial Wealth State Pension 
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  1. 360.
    Investment in tangibles such as real estate is considered as an inflation hedge and providing long-term growth. Furthermore, it is inked to pride of ownership and can therefore at the same time serve as investments and sources of pleasure. The value of property however depends on its marketability and liquidity. „Marketability means you can find a ready market if you want to sell the investment. Liquidity means the investment is not only marketable and easily accessible but also has a stable price.“ Shim/Siegel 1991, p. 232. Beck 2006 put the value of real estate as the right kind of provision for retirement into question for the disadvantages linked to this marketability and liquidity, due to the existence of a chunk risk (one would never invest that much into one single stock) and because the return depends on very specific characteristics such as e.g., the location, while the maintenance and opportunity costs need to be considered as well. Therefore, living in a house is never for free. See Beck 2006, p. 9.Google Scholar
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    The age distribution of this investor group reveals that 5% of the interviewees are older than 65 and still working (at least part-time). This is a phenomenon confirmed by Kortmann et al. 2005 who find that a higher share of self-employed individuals is still gainfully employed at the age of 65. See Kortmann et al. 2005, p. 34.Google Scholar
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    Since this study focuses on the affluent segment, the individuals in this target group can be assumed to have a higher level of financial sophistication, which in return would lead to the expected start at a younger age. See Kennickell et al. 1997, p. 2.Google Scholar
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    MacFarland et al. 2004, p. 114.Google Scholar
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    Since these investor types can be considered as more sophisticated, this finding also corresponds to the results of the OECD report on financial literacy, namely that “more financially sophisticated consumers prefer the internet.” OECD 2005, p. 54.Google Scholar
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    The development that individuals are preparing the transition into retirement and cash-out assets caught in private insurances is also confirmed by DIA 2005d.Google Scholar
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    As mentioned above, the BVI stated that in 2004 31% of all mutual fund assets were invested in equity and a further 5% in balanced funds. Assuming that balanced funds have on average about a third invested in equity the total proportion of equity investments within mutual funds for Germany amounts to about a third. See Schardt von Barby 2005, p. 86.Google Scholar
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    This reflects a key proposition of the behavioral life-cycle hypothesis, namely that drawdown of assets in the dissaving period is slower than predicted by the standard life-cycle hypothesis. See section 4.3.1/Shefrin/Thaler 1988, p. 632.Google Scholar
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    According to the STBA 2003b, Einkommen und Einnahmen sowie Ausgaben privater Haushalte in den Gebietsständen — Deutschland insgesamt, Table UB2, the average income for a German is €2,833 per month.Google Scholar
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    Orgland 2006 for example stated that the individual tailoring is precisely the reason for why there is no general rule about the recommended saving rate.Google Scholar
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