1.

Introduction

1.1 Background of the Study

Nowadays, the population of employees and future retirees in Malaysia is

increasing rapidly. The reality hits when people find that they cannot afford to retire

because they had not seriously put aside the money in their early life (Habib, 2007).

Individuals are encouraged to start planning for their later life of their retirement

especially during their golden year and not only nearly the retirement. The Statistics

of Labour Force, Malaysia, January 2010- series 7/ March 2010 showed that the

number of employed person rose by 3.4 percent in January 2010 to 11.1875 million

compared with 10.817 million in January 2009. As this situation continuing, the

number of pre-retirees will increase in the future. Therefore, retirement planning

becomes an essential issue of our life. Do individuals think about and plan for

retirement? Malaysians are less of confidence about preparing retirement plan due to

the financial illiteracy (Hunt, 2009). Besides, the president of Life Insurance

Association of Malaysia (LIAM), Ng Lian Lau estimates less than 5% ready for

retirement in Malaysia (Habib, 2007).

1.2 Problem Statement

Many view the pre-retirees and workers as woefully unprepared for their

golden years. Bernheim (1992) suggested they was saving just one-third of what they

needed to retire comfortably. In fact, Warshawsky and Ameriks (2000) predict that

fully half of all individuals’ ages 25-71 years will not have sufficient savings to

support themselves in retirement. Although retirement does not seem to be a

phenomenon that is restricted to industrialized countries, in many developing

countries there is continuity in older people’s participation in the labor world, which

is a sign that retirement has not been completely institutionalized (Szinovacz, 2003).
 Many households are unfamiliar even the most basic economic concepts

needed to make saving and investment decisions (Lusardi & Mitchell, 2007). Such

financial illiteracy is widespread; the young and older citizen in Malaysia will appear

woefully under-informed about basic financial concepts, with serious implications for

saving, retirement planning, mortgages, and other decisions. In general, working

individuals may not be familiar with even the most basic economic concepts needed

to make sensible saving and investment decisions. With insufficient knowledge on

how to manage their income, the result might be no proper saving planning for their

afterlife of retirement.

In general, younger generation of working individuals might think that

retirement planning is burden for them because involve long-term planning. Ng Lian

Lau of Life Insurance Association of Malaysia (LIAM) says that those in their 20s

think they are too young to think about retirement, while those in their 30s and 40s

tend to believe they are doing enough because they have their EPF savings, and those

who are 55 feel it is just too late for them. And the truth is at 55, most people cannot

afford to retire (Habib, 2007).

Hira, Rock and Loibl, 2009 found that only few studies that investigated age

differences in retirement planning, the result from an extensive search of the current

literature. Hershey (2004) argues that although demographic factors have an influence

on retirement saving decisions, in construct, psychological factors also have direct

effect on savings decisions.

1.3 Research Questions and Objectives

In this study, two research questions are addressed: (1) Is the retirement

planning behavior of working individuals affected by different age groups? (2) What

are the factors influencing retirement planning behavior? The objectives of our study
are: (1) to examine the retirement planning behavior of working individuals from

different age groups. (2) to examine whether other demographic variables are relative

importance for retirement planning. (3) to determine the role of psychological

variables in retirement planning behavior. (4) to determine the characteristic of the

demographic variables.

1.4 Significance of the Study

Our study might benefit the society especially working individuals

acknowledge the importance of the retirement in people’s lives (Rosenkoetter &

Garris, 1998). They may have a clearer picture about the factors that might affect their

behavior of the retirement planning. Timing might play an important in making

retirement planning successfully, so from this study the audience might found out

when is the suitable timing to start the retirement planning. The retirement planning

always becomes an important issue in our country. Thus, the government could refer

this study what is the current situation in order to support the citizen in developing a

better environment in their afterlife of retirement.

1.5 Outline of the Study

The remaining sections of the proposal are organized as follows: Chapter 2

presents the research problem theories, theoretical framework and issues or

propositions of the research. Chapter 3 discusses the samples design, methodology of

data collection of this research.

 2. Literature Review

2.1 Theory/ Concept

Symbolic interaction theory is one of the several theories in the social sciences

and was applied in this study. This theory claims that facts are based on and directed

by symbols (Aksan, Kisac, Aydin & Demirbuken, 2009). According to this theory,

people live both in the natural and the symbolic environment and focuses attention on

the way that people interact through symbols such as words, gestures, rules and roles.

There are three core principles in symbolic interaction perspective of Blumer, the

founder of symbolic interaction theory, which are meaning, language and thinking.

There are five concepts in symbolic interaction theory. There are role, self,

interaction, culture and norm (Meltzer, Petras & Reynolds, 1975). Role is collections

of expectations that define regularized patterns of behavior within family life. The self

concept is the image we have of who and what we are; it is not fixed and might

influence by someone for examples teachers and friends. Through the process of

interaction and communication with others, the self concept is developed. People

become unique individuals through their interaction with others. Culture refer that the

behavior in some way takes into account the other person, group or social

organization, and is guided by what they do. It also emerges through the process of

communication and interaction. The concept of norm seems to identify

unambiguously a clear-cut and ubiquitous element of social life (Blake & Davis,

1964). Every groups or norms have its rules that it hardly identified as a whole.

The working individuals are the target sample in our study. Through the

symbolic interaction theory, we might know the perspective of working individuals

toward the proximity of retirement planning. As we divide the working individuals

into three groups according their age, they might have different thinking and
perspective toward the retirement planning among them. As the result, the attitude of

individuals will influence their behavior on making decision in retirement planning.

Moreover, the way of their thinking might influence the group among them due to the

social interaction process. The working individuals those are more knowledgeable

about the retirement planning tends to influence other individuals from his point of

view. When the interaction among the individuals is successful, the retirement

planning might become a culture of society.

2.2 Past Empirical Studies

According to Kim, Kwon and Anderson (2004), the individuals’ retirement

confidence tend to be higher than others as they calculated their retirement fund needs

and had more savings. The higher level of confidence will be achieved, if those invest

in government programs such as Social Security and Medicare. The level of

confidence will increase as the higher household income and provided that they are

better health. The working individuals who received workplace financial education

and advices will help them have more confidence toward retirement planning. The

survey is done through the 20-minutes telephone interview among 1,002 individuals

that their age 25 and older in the United State of America.

The employer should provide the retirement information and advice that are

highly valued service for the employees in order for them to do the retirement

planning earlier in their career (Power & Hira, 2004). This provided information will

increase the retirement satisfaction by using a balanced portfolio approach that

targeted in women and union. The predictors of satisfaction in this study gender,

planning practices, job classification and age were significant variable in the

retirement. The objective of retirement should be regulated to expand the quality of

the retirement plan. The survey was conducted via telephone interview among 1,609
eligible employees by sample frame and 660 individuals were selected by fractional

systematic sampling in the United State of America.

According to Wong and Earl (2009), retirees neglected retirement planning

because they have certain level of difficulty in adjusting to retirement. A

questionnaires survey was conducted in Australia, 394 respondents out of 918

respondents responded on the questionnaires which yielding a response rate of 43%.

In the findings, the result suggests that only individuals: (1) demographic; and (2)

health, and organizational: (1) conditions of workforce exit influences predict a better

retirement planning. Psychosocial: (1) work centrality influences have no significant

impact on retirement planning behavior in an integrated model. This shown that

individuals predictors can be defined as individuals characteristic which can relate to

our study has a significant influence towards retirement planning behavior.

Lusardi et al. (2007) shown that planners accumulate large amounts of wealth

than non-planners through saving, investment, probability of selling house to finance

retirement and others. A wise planner can enjoy their retirement life with large

amount of wealth compare with those who is not ready for retire because planning is

strongly positively associated with higher total net worth of individuals. This study

used standard economic model of wealth accumulation to coordinate with

consumption decisions. A questionnaire survey was conducted to track assets,

liabilities, health and patterns of wellbeing in older households to compare the

experiences of Early Baby Boomer cohort in the 51-56 age range on the sample size

of 2634 households. This survey was conducted based on Health and Retirement

Study (HRS), which is a representative survey of Americans over the age of 50.

Joo and Pauwels (2002) indicated that for those who are younger and who

have higher level of education reported a higher retirement confidence. This showed
that younger generations have an early retirement planning or could represent false

confidence due to they believe they have enough time for their retirement planning.

This study used the data from 1999 Retirement Confidence Survey, which is

conducted by the America Employee Benefit Research Institute and this survey

targeted on 1002 individual workers via 22-minute telephone calls survey.

Lai, Lai and Lau (2009) found that there are significant difference between

teaching position, education and age across the annual income levels from academics’

perspectives. This survey found that academics exhibited positive attitudes toward

money and income appears to be the prime motivator. Meanwhile, the result showed

that female academics and those from public universities had more positive attitudes

toward retirement. The payment for children’s education was the key potential

conflict area. The results of this survey suggested the universities provide retirement

planning assistance and pre-retirement counseling to the academics. A questionnaire

survey that inclusive a series of questions regarding money attitudes and retirement

planning was personally investigated towards 458 academics in 16 universities in

Malaysia.

Montalto, Yuh and Hanna (2000) found that for the working full-time

variable, the age is inversely related to the probability of the currently full-time people

from 35 to 70 years old and the most noticeable declines occurring after the age 50.

For planned retirement age variable, the level of financial assets (excluding

IRA/KEOGH and defined contribution values), nonfinancial assets, and other private

pension funds significantly lower the planned the planned retirement age. Levels of

financial assets and nonfinancial assets lower the planned retirement age is relatively

more than levels of IRA/KEOGH accounts or defined-contribution pension plans.

This study used 1995 Survey of Consumer Finances (Kennickell, Starr-McCluer &
Sunden, 1997) to interview 1,607 head of household age from 35 to 70 years who

were currently working full-time in the United States.

Thinking about retirement and attending planning meetings have a significant

positive impact with the level of satisfaction (Elder & Rudolph, 1999). Planning

activities imply a higher likelihood of satisfaction even those whose retirement

decisions were not made voluntarily (either through health problems or an employer

mandate). Marital status, health status, level of education, whether the individual was

forced retires, and pre-retirement occupation as well as the retirement planning have

an impact on the level of the retirement satisfaction. Individuals in households with

higher incomes and larger net worth are predictably, more likely to be satisfied. This

study is conduct through questionnaire with 1,781 retired individuals from the first

wave of the HRS.

The future time perspective, financial knowledge, and financial risk tolerance

are all important variables when it comes to understanding individuals’ retirement

saving practices (Jacobs-Lawson & Hershey, 2005). The interactions are not only

limit individually but also in combination with one another. For three-way interaction,

there are no relationship between risk tolerance and saving for those who were both

low in time perspective and knowledge. The risk tolerance is marginally significant

influenced the saving provided those with a short time perspective and high in

knowledge. Risk tolerance is significant influenced the saving tendencies, for those

who are high in future orientation and either high or low in knowledge. The data were

collected through questionnaire of 270 working adults, members of a large household

data panel maintained by a major international market research firm in America.

Stawski, Hershey and Jacobs-Lawson (2007) indicated that retirement goal

clarity is a significant predictor of planning practices, and planning, in turn to prdict

savings tendencies. This study found that income and age were also revealed to be

important elements of the model with income accounting for roughly half of the

explained variance in savings contributions. One-hundred adults served as voluntary

participants in this study and the data were collected through questionnaire. Path

analysis techniques were used to test two competing models, both of which were

designed to predict savings contributions.

2.3 Hypothesis Development

1. Age group is significant related to retirement planning behavior.

2. Income level is significant related to retirement planning behavior.

3. Education level is significant related to retirement planning behavior.

4. Goal clarity is significant related to retirement planning behavior.

5. Attitude toward retirement is significant related to retirement planning behavior.

6. Potential conflict in retirement is significant related to retirement planning

behavior.

2.4 Proposal Conceptual/Framework

Age Group

Education
level

Income level

Retirement Planning
Goal Clarity Behavior

Potential
conflict in
retirement
planning

Attitude
toward
retirement

Figure 1 Conceptual framework

 3. Research Method

3.1 Research design

This study is an explanatory research that establishes causal relationships

between variables. The emphasis is on studying why most people cannot afford to

retire at 55 (Habib, 2007) in order to explain the relationship between the factors with

the retirement planning. This study used survey strategy that collects quantitative data

through questionnaire. The data collected in this study can be used to suggest possible

reasons for the relationship between the factors that going examine with retirement

planning. By using a standardized questionnaire questions for all the samples that we

want to analyze in order to answer our research question. This is cross-sectional study

due to at a particular time.

3.2 Population sample and Sampling Procedures

A total of 300 working individuals will participate in this study. Sampling of

this study is limited to working individuals from 26 to 55 years old. Normally, the

working individuals reached age 26 are work for few years and have some working

experience and savings, thus the population sample in this study is start from age 26.

Due to the equally chances of each working individual from 26 to 55 years old being

selected among the population in Malaysia is unknown, as a result the sampling

technique is non-probability sampling. Quota sampling is used to select the data from

a large population of working individuals. In this study, working individuals are

divided into 3 age groups, which are 26 to 35, 36 to 45 and 46 to 55 years old and

each group’s sample size will be 100. Quota sampling is useful to stratify the data and

allows us to divide the working individuals into specific groups. This is able to

overcome the variations between groups to ensure their availability for survey. The

selected areas of this study in Malaysia are Kuala Lumpur, Selangor, Ipoh and Johor.
3.3 Data Collection Method

This study is conducted by collecting the primary data from the samples to

represent the working individuals. The method that used in collecting data is the

questionnaire technique. Each participant is asked to respond to the same set of

questions, it provides an efficient way in collecting responses from a large sample of

working individuals to quantitative analysis. The type of questionnaire that selected in

this study is delivery and collection questionnaire which is under self-administered

questionnaire. The participants need to complete the questions and it will be collected

back on the spot. This type of questionnaire might increase level of confident to

receipt the responses back because the questionnaire questions are delivered by hand

to each respondent and collected back later. Although this might adds to costs and it is

time consuming, but the high response rates are achievable as high as 98 per cent

(Saunders, Lewis & Thornhill, 2009).

3.4 Variables and Measurement

In this study, there are six independent variables and one dependent variable in

testing the hypothesis. The independent variables are divided into two sections, which

are demographic variables: (1) age; (2) education level; and (3) income level and

psychology variables: (1) goal clarity; (2) attitude toward retirement; and (3) potential

conflicts in retirement planning. The dependent variable is retirement planning

behavior.

Variables that provide demographic information are age, gender, marital

status, number of children, ethnicity, investment instruments, education level and

income level, are categorized under categorical group. Nominal is the measurement

scale for age of the working individuals (26-35, 36-45, and 46-55), gender (male and

female), marital status (single, married, divorced, and widow), number of children (1-
3, 4-6, 7-9) ethnicity (Malay, Chinese, India and others) and investment instrument

(unit trust, stock, bond, fixed deposit, savings, long-term care insurance, property,

estate and foreign currency). For education level and income level, there are ordinal

data. The education level are divided into seven groups, which are primary school,

secondary, diploma, bachelor’s degree /professional, master’s degree, PhD and others.

Income level are divided into six categories, RM 1,000 and below; RM 1,001 – RM

3,000; RM 3,001 – RM 5,000; RM 5,001 – RM 7,000; RM 7,001 – RM 9,000 and

More than RM 9,000.

Goal clarity is measured using a five-item scale adapted from Stawski,

Hershey and Jacobs-Lawson (2007) designed to measure level of retirement goal

clarity (Appendix). All items from this scale uses a five-point response format, where

1= strongly agree and 5= strongly disagree. The attitude toward retirement scale

contains four items adapted from Lai et al. (2009) designed to assess the individuals’

opinion toward the retirement (Appendix). Each of the items uses a five-point scale

ranging from 1 (strongly agree) to 5 (strongly disagree). The potential conflicts in

retirement planning are measured using a six-item scale adapted from Lai et al. (2009)

designed to indicate the perceived potential conflicts in retirement planning

(Appendix). All items from this scale uses a five-point response format (1= very

important, 5= very unimportant).

Retirement planning behavior is measured using a three-item scale (Warren &

Rossiter-Base, 2004) with a different five-point Likert scale designed to evaluate

individuals’ behavior toward the retirement planning. All the items in this scale with

its response format: 1. Financial preparation for retirement (1= very good, 5= very

poor); 2. Expectations of standard of living in retirement (1= slightly increase, 5=

decrease); and 3. Confidence in achieving a decent standard of living in retirement

(1= very confident, 5= very unconfident).

3.5 Data Analysis Techniques

Descriptive statistic is used to describe the characteristics of the data collected

in the sample profile or the variables. In the descriptive analysis table, the

independent variables are divided into two sections, which are demographic and

psychological variable.

For inferential analysis, this study is conducted by using correlation for testing

the relationship between the variables. This analysis is not enough to prove whether

the relationship is significant in testing the hypothesis, it is used to determine whether

there is a positive, negative relationship provided strong or weak or no relationship.

A multiple regression analysis is used to conduct this study to analyze the

data. By using the multiple regression analysis, it is used to analyze the significant

independent variables that influence the retirement planning behavior of the working

individuals.