Impact of Financial Literacy on Retirement Financial Portfolio: Evidence from China*

Financial literacy is an important factor that affects financial assets saved for retirement. Based on the China Household Finance Survey (2017) data and the two-stage life cycle model, we study the impact of financial literacy on retirement financial portfolios. The findings are as follows: (i) financial literacy has a significant positive impact on the choice of wealth management products, risky financial assets and the total amount of retirement financial assets, but it has a negative impact on the choice of bank savings; (ii) financial literacy has a significant negative impact on the proportion of savings but has a significant positive impact on the proportion of wealth management products and risky financial assets; and (iii) using a different financial literacy index, considering selection bias and the influence of financial practitioners in the household, we prove the reliability of the above results. The paper highlights the importance of financial education and provides strong support for public (government) involvement to strengthen financial literacy education and improve the awareness of retirement financial planning to reduce the financial pressures faced by many of China's elderly citizenry.