Measures to Encourage Retirement Savings in China The Role of Loss Aversion

Abstract

As the aging of population and the lack of sufficient funds for a comfortable retirement life, saving for retirement is becoming increasingly important. Peoples decisions about retirement savings are influenced by cognitive biases and heuristics, such as loss aversion. This paper examines the impact of loss aversion on pension savings in China. Chinas pension reserves are slightly insufficient, and defined-benefit schemes put pressure on the government and fail to enable people to maintain their original standard of living after retirement. Therefore, this paper proposes the inclusion of save more tomorrow and annuities to address these problems. This paper also suggests simplifying the process of increasing pension savings, choosing an appropriate retirement savings rate, and diversifying investment portfolios. It highlights the need for individuals and policymakers to plan and prepare for demographic change and the impact of loss aversion on retirement savings. Recommendations are made to improve retirement savings to ensure a secure and sustainable future for all.