Title: Behavioural finance theory: implications for retirement savings

Authors: Michael Ntalianis, Victoria Wise

Addresses: School of Accounting, Faculty of Business, Victoria University, P.O. Box 14428, MCMC, Melbourne, VIC 8001, Australia. ' Deakin Business School, Faculty of Business and Law, Deakin University, 221 Burwood Highway, Melbourne VIC 3125, Australia

Abstract: This paper contains an overview of the life-cycle model and the behavioural finance theories that assist in explaining why individual savings behaviour deviates from what is predicted by this model. According to Bernstein (1996), the behavioural research evidence suggests irrationality, inconsistency and incompetence in the way individuals approach and arrive at decisions and choices when faced with uncertainty. The review of literature undertaken in this paper confirms that numerous individuals are not adequately equipped to handle the complex decisions required to properly plan and save for their retirement. While the targeting of educational resources to those individuals who are prepared to actively engage in the management of their retirement funds is likely to be beneficial, there is a need for behavioural factors to underpin future retirement savings policies.

Keywords: behavioural finance theory; educational resources; life-cycle models; retirement savings policies; irrationality; inconsistency; incompetence; individual behaviour; decision making; choices; uncertainty; retirement funds; personal planning; behavioural research; healthcare research.

DOI: 10.1504/IJBHR.2009.032153

International Journal of Behavioural and Healthcare Research, 2009 Vol.1 No.4, pp.335 - 352

Published online: 11 Mar 2010 *

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