Factors Determining Financial Retirement Planning of Government Employees: Experience from Tanzania
DOI:
https://doi.org/10.47941/ijf.3077Keywords:
Retirement Planning, Financial Literacy, Financial Decision Behavior, TanzaniaAbstract
Purpose: The study examined the factors affecting financial retirement planning of government employees in Tanzania.
Methodology: The study employed a positivist paradigm, deductive approach, and cross-sectional survey design. The study collected quantitative data through questionnaire from government employees in Tanzania. Data from 408 employees across 24 ministries were analyzed descriptively using IBM SPSS 25, and inferentially using PLS-SEM (SmartPLS 3), which is chosen for its suitability with complex models. The hypothesized model of the study examined whether computation capability, financial knowledge, financial education, risk altitude towards financial products and financial decision behavior determines government employee’s retirement planning.
Findings: Findings revealed that computation capability, risk attitude, and financial decision behavior had statistically significant positive effects on retirement planning, while financial knowledge and financial education were insignificant.
Unique Contribution to Theory, Policy and Practice: Theoretically, it was established that variables of computation capability, risk attitude towards financial products and financial decision behavior collectively determine employees’ financial retirement planning preparedness which is grounded in the ideas of anticipated benefit and planned behavior. The practical implications emphasize the study's contribution to improving financial planning readiness among government employees in Tanzania. The policy consequence of this study is that governmental regulators such as SSRA, and pension scheme providers like NSSF and PSSSF, should include the identified criteria from this study in their policy evaluations to ensure reliable and efficient retirement planning.
Downloads
References
Ajzen, I. (1991). The theory of planned behavior. Organization behavior and human decision process, 50(2), 179 – 211.
Arianti BF (2018). The influence of financial literacy, financial behavior, and income on investment decisions. EAJ (Econ Account J) 1(1):1–10
Batsaikhan, U., & Demertzis, M. (2018). Financial literacy and inclusive growth in the European Union. Policy Contribution, (8), 18.
Bayar, Y., Sezgin, H. F., Öztürk, Ö. F., & Sasmaz, M. Ü. (2020). Financial literacy and financial risk tolerance of individual investors: Multinomial logistic regression approach. Sage Open, 10(3), 2158244020945717.
Bianchi, M. (2018). Financial literacy and portfolio dynamics. Journal of Finance, LXXIII (2), 831–
Bellofatto, A., D’Hondt, C., & De Winne, R. (2018). Subjective financial literacy and retail investors’ behavior. Journal of Banking and Finance, 92, 168–181. https://doi.org/10.1016/ j.jbankfin.2018.05.004
Bongini, P., Cucinelli, D., & Bongini, P. (2019). University students and retirement planning: never too early. https://doi.org/10.1108/IJBM-03-2018-0066
Bucher-Koenen, T., Alessie, R. J., Lusardi, A., & Van Rooij, M. (2021). Fearless woman: Financial literacy and stock market participation (No. w28723). National Bureau of Economic Research.
Canfield, M. (2019). Financial literacy: The argument for required coursework regarding personal finance in schools. Western Michigan University. Retrieved from https://scholarworks.wmich.edu/honors_theses/3140.
Chin, W. W., & others. (1998). The partial least squares approach to structural equation modeling. Modern Methods for Business Research, 295(2), 295–336
Doorley, K., & Nolan, A. (2019). The Determinants of Retirement Planning within Couples in Ireland. (ESRI Discussion Paper Series IZA DP No. 12188).
Epaphra, M., & Kiwia, B. P. (2021). Financial literacy and participation in the financial markets in Tanzania: An application of the logit regression model. Journal of Economic and Financial Sciences, 14(1), 13.
Farooq, S. H., Shah, S. Z. A., & Rasheed, S. (2021). Impact of financial attitude, financial literacy and parental financial socialization on prudent financial management practices: A moderating effect of financial well-being among the youth of Pakistan. Abasyn University Journal of Social Sciences, 14(1), 14-33
Fatoki, O. (2014). The financial literacy of micro entrepreneurs in South Africa. Journal of Social Sciences, 40(2), 151-158.
Fanta, A., & Mutsonziwa, K. (2021). Financial literacy as a driver of financial inclusion in Kenya and Tanzania. Journal of Risk and Financial Management, 14(11), 561.
Gaskin, J. (2016). SmartPls3 Running and Interpreting a Causal Model. MP4. Retrieved May 26, 2024, from http://youtibe.com/Gaskination
Githui, T., & Ngare, P. (2014). Financial Literacy and Retirement Planning in the Informal Sector in Kenya. International journal of Education and Research.
Hamid, F. S., & Loke, Y. J. (2021). Financial literacy, money management skill and credit card repayments. International Journal of Consumer Studies, 45(2), 235-247. LBIBf 20(2), pp. 49-65
Hair, Joe F., Ringle, C. M., & Sarstedt, M. (2011). PLS-SEM: Indeed, a silver bullet. Journal of Marketing Theory and Practice, 19(2), 139–152. https://doi.org/10.2753/MTP1069-6679190202
Hair, J F, Black, W. C., Babin, B. J., & Anderson, R. E. (2014). Multivariate Data Analysis (new int. ed.). Harlow: Pearson Education.
Hair, J. F., Sarstedt, M., Hopkins, L., & Kuppelwieser, V. G. (2014). Partial least squares structural equation modeling (PLS-SEM): An emerging tool in business research. European Business Review, 26(2), 106–121.
Hair Jr, Joseph F, Hult, G. T. M., Ringle, C. M. & Sarstedt, M. (2017). A primer on partial least squares equation modeling (PLS-SEM). Sage Publication, Inc.: Thousand Oaks, CA, USA.
Hair, J., Hult, G. T. M., Ringle, C. M., Sarstedt, M., & Thiele, K. O. (2017). Mirror, mirror on the wall: a comparative evaluation of composite-based structural equation modeling methods. Journal of the Academy of Marketing Science, 45(5), 616–632.
Hair, J., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2–24.
HairJr, J. F., Howard, M. C., & Nitzl, C. (2020). Assessing measurement model quality in PLS-SEM using Confirmatory Composite Analysis. Journal of Business Research, 109, 101–110.
Henseler, J., Hubona, G., & Ray, P. A. (2016). Using PLS path modeling in new technology research: updated guidelines. Industrial Management and Data Systems, 116(1), 2–20.https://doi.org/10.1108/IMDS-09-2015-0382
Pallant, J., & Manual, S. S. (2016). A step-by-step guide to data analysis using IBM SPSS. Australia: Allen & Unwin. doi.
Patricia, D. & Fauziah, M. (2019). The Effect of Financial Literacy and Financial Management Behavior on Retirement Confidence. Advances in Economics and Management Research. Vol. 97. Atlantis Press, PICEEBA.
Peiris, T. U. I. (2021). Effect of financial literacy on individual savings behavior; the mediation role of intention to saving. European Journal of Business and Management Research, 6(5), 94-99.
Kafari, E. (2019). Financial Literacy and Retirement Planning among Employees at Ghana GRID Company. Master’s Thesis. University of Coast, Ghana.
Kamakia, M. G., Mwangi, C. I., & Mwangi, M. (2017). Financial literacy and financial wellbeing of public sector employees: A critical literature review. European Scientific Journal, 13, 233-249.
Kock, N. (2017). Common Method Bias: A Full Collinearity Assessment Method for PLS-SEM. Springer International Publishing AG 2017. https://doi.org/10.1007/978-3-319-64069-3
Kulondwa, S. & Njoka, C. (2021). Financial Literacy and Personal Retirement Planning among Public Sector Employees in Bukavu City, The DRC. Journal of Business and Management. Vol. 23, Issue 3: 01-13.
Kim, K. T., Anderson, S. G., & Seay, M. C. (2019). Financial knowledge and short-term and long-term financial behaviors of millennials in the United States. Journal of Family and Economic Issues, 40(2), 194–208. https://doi.org/10.1007/s1083 4-018-9595-2
Klapper, L., & Lusardi, A. (2020). Financial literacy and financial resilience: Evidence from around the world. Financial Planning Review, 3(2), e1103. https://doi.org/10.1002/cfp2.1103
Lewin, K. (1943). Defining the 'field at a given time. Psychological Review, 50(3), 292-308.
Lowry, P. B.& Gaskin, J. (2014). Partial least squares (PLS) structural equation modeling (SEM) for building and testing behavioral causal theory: When to choose it and how to use it. IEEE Transactions on Professional Communication, 57(2), 123–146.
Lusardi, A., & Messy, F. (2023). Financial literacy and retirement planning in the digital age. Journal of Pension Economics & Finance.
Metto, W. K. (2020). The relationship between member financial literacy and loan repayment in savings and credit co-operative societies in Uasin-Gishu County, Kenya. International Journal of Community and Cooperative Studies, 8(1), 9-22.
Mu~noz-Murillo, M., _Alvarez-Franco, P. B., & Restrepo-Tob_on, D. A. (2019). Journal of Behavioral and Experimental Economics the role of cognitive abilities on financial literacy: New experimental. Journal of Behavioral and Experimental Economics, 84, 21. https://doi.org/10.1016/j.socec.2019.101482.
Muriithi, G. N. (2021). The Effect Of Behavioural Biases On Investment Decisions By Real Estate Developers In Nairobi, Kenya (Doctoral dissertation, University of Nairobi).
Mbelwa, L. H., & Lenatusi, M. L. L. (2019). Assessment of Factors That Influence Management Reliance on Internal Audit Function: Evidence From Oil and Gas Companies Operating in Tanzania. Business Management Review, 22(1), 13–30.
Mpaata, E., Koske, N., & Saina, E. (2021). Does self-control moderate financial literacy and savings behavior relationship? A case of micro and small enterprise owners. Current Psychology, 1-14.
Niu, G., Zhou, Y., & Gan, H. (2020). Financial literacy and retirement preparation in China. Pacific-Basin Finance Journal, 59, 17. https://doi.org/10.1016/ j.pacfin.2020.101262
Nguyen, T. A. N., & Rozsa, Z. (2019). Financial literacy and financial advice seeking for retirement investment choice. Journal of Competitiveness, 11(1), 70–83. https://doi.org/10.7441/ joc.2019.01.05
Ogoi, H. J. (2019). Role of Financial Literacy in Retirement Planning in Rwanda: A Case Study of Rwanda Revenue Authority (RRA). International Journal of Research in Management, Economics and Commerce, Vol. 9, Issue 4, pp. 10-16
Oteng, E. (2019). Financial literacy and investment decisions among traders in the techiman municipality. w, 10(6), 50e60. https://doi.org/10.7176/RJFA
Robb, C. A., & Woodyard, A. S. (2011). Financial knowledge and best practice behavior. Journal of Financial Counseling and Planning, 22(1), 60–70.
Rodrigues, L. F., Oliveira, A., Rodrigues, H., & Costa, C. J. (2019). Assessing consumer literacy on financial complex products. Journal of Behavioral and Experimental Finance, 22, 93–104.
Safari, K., Njoka, C., & Munkwa, M. G. (2021). Financial literacy and personal retirement planning: A socioeconomic approach. Journal of Business and Socio-Economic Development, 1(2), 121-134.
Satria, A. and Hutabarat, S. (2020), “Analysis the effect of financial literacy on financial planning for retirement (Case study of lecturers and administrative staffs in universitas Indonesia)”, Vol. 11 No. 5, pp. 741-750, doi: 10.34218/IJM.11.5.2020.066.
Sarpong Kumankoma, E. (2021). “Financial Literacy and Retirement Planning in Ghana.” Review of Behavioral Finance, 1940–5979. https://doi.org/10.1108/RBF-05-2020-0110.
Senda, D. A., Rahayu, C. W. E., & Rahmawati, C. H. T. (2020). The effect of financial literacy level and demographic factors on investment decision. Media Ekonomi Dan Manajemen, 35(1), 100-111.
Snyder, C. & Nicholson, W. (2011). Microeconomics Theory: Basic Principles and Extensions. 11th edition. Cengage Learning.
Sarstedt, M., Ringle, C. M., & Hair, J. F. (2021). Partial least squares structural equation modelling. In Handbook of market research (pp. 587-632). Cham: Springer International Publishing.
Tuffour, J. K., Amoako, A. A., & Amartey, E. O. (2022). Assessing the effect of financial literacy among managers on the performance of small-scale enterprises. Global Business Review, 23(5), 1200-1217.
Thorsten, Hens; Marc, Oliver, R. (2010). Financial Economics a Concise Introduction to Classical and Behavioral Finance. Springer.
URT, the National website: https://www.tanzania.go.tz; United Republic of Tanzania
Voorhees, C. M., Brady, M. K., Calantone, R., & Ramirez, E. (2016). Discriminant validity testing in marketing: an analysis, causes for concern, and proposed remedies. Journal of the Academy of Marketing Science, 44(1), 119–134.
Yahaya, R., Zainol, Z., Haji, J., Zainal, O., Abidin, Z., & Ismail, R. (2019). The effect of financial knowledge and financial attitudes on financial behavior among university students. International Journal of Academic Research in Business and Social Sciences, 9(8), 22e32. https://doi.org/10.6007/IJARBSS/v9-i8/6205.
Yamane, T (1967); Statistics. An Introduction Analysis, 2nd Ed., New York; Hamper and Row
Zeka, B., and M. Matchaba-Hove. 2016. “Determining Retirement Intentions: A Study of Working Individuals in the Eastern Cape, South Africa.” In Proceedings of International Academic Conferences (No. 4006304). International Institute of Social and Economic Sciences. https://doi.org/10.20472/IAC.2016.024.100.
Zhan, Y., Wang, M., & Daniel, V. (2019). Lifespan Perspectives on the Work-to-Retirement Transition. Work across the lifespan. Elsevier Inc. https://doi.org/10.1016/B978-0-12-812756-8.00025-6
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Tiberius Phillip Mlowosa, Prof. Gwahula Raphael Kimamala (PhD), Dr. Dionis Ndolage (PhD)
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
