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1Tahira K. Hira, Professor, Iowa State University , 1096 LeBaron, Ames, IA, 50010. E-mail: tkhira@iastate.edu
2Olive M. Mugenda, Associate Professor, Kenyata University, Nairobi, Kenya. E-mail: omugenda@nbnet.co.ke
Journal Paper No. J-17987 of Iowa Agriculture and Home Economics Experiment Station, Ames, Iowa. Project No. 3133, and supported by Hatch
Act and State of Iowa funds.
©1998, Association for Financial Counseling and Planning Education. All rights of reproduction in any form reserved. 75
Predictors Of Financial Satisfaction:
Differences Between Retirees And Non-retirees
Tahira K. Hira1 and Olive M. Mugenda2
The main purpose of this study was to identify differences in factors that predict financial satisfaction
among retirees and non-retirees and to ascertain how retirees and non-retirees differ in financial
beliefs and behavior. Non-retirees were more likely than otherwise similar retirees to report worrying
about finances. A higher proportion of non-retirees reported dissatisfaction with various aspects of
their financial situation. However, non-retirees were more likely to perceive themselves as financially
better off in comparison to others, or in relation to the past, than the retired respondents. Non-retirees
were more optimistic about their future financial situation.
Key Words: Financial situation, Retirees, Satisfaction
Retirement refers to a condition in which an individual is
forced or allowed to leave the labor market, or is
employed less than full-time, and in which his or her
income is derived, at least in part, from a retirement
pension earned through past years of service as a job
holder (Atchley, 1970). It is therefore the final phase of
the occupational life cycle. The employment necessary to
make retirement possible need not be continuous.
Palmore, Fillenbaum and George (1984) caution that
retirement is not synonymous with work cessation
because many retirees go back to the labor market for
post retirement employment.
Older Americans are the most rapidly growing
population segment and are expected to constitute one
fifth of the population by 2035 (Schulz, 1992). Moehrle
(1990) predicted that people ages 65 and over will make
up more than 23 percent of the population in 2030.
Though the normal retirement age (NRA) is 65 years,
most people retire before this age despite the
unavailability of medical benefits until age 65 (Munnel,
1991). As the number of the elderly persons has
increased, the average age of retirement has declined
(Moon, 1990), and the number of retirees has therefore
increased.
Cutler (1991) observed that the presence of people living
longer is producing a population characterized by
unparalleled financial as well as social, cultural, and
political implications. Revealing factors that affect
financial behavior and satisfaction among the retirees is
therefore important for policy and educational
implications.
The purpose of this study is therefore to identify
differences in factors that predict financial satisfaction
between retirees and non-retirees. Financial satisfaction
among retirees and non-retirees is critical in that financial
satisfaction has been found to influence overall quality of
life (Andrew & Withey, 1976).
Review of the Literature
Socioeconomic Characteristics
Studies show that retirees and non-retirees differ in terms
of age, income, educational level, economic
characteristics, and environmental factors. Larger
proportions of retirees than non-retirees were married
(70% verses 68%), and persons with less education were
more likely to be retirees (Schwenk, 1990). Older
persons have lower incomes on the average than younger
ones, partly because the income of older persons is
usually reduced by one third to one half after retirement
(Harris, 1986). Between 1980 and 1988, however,
incomes increased by 20% for those 65 and over,
compared with 14% for those between 15 and 64 (Moon,
1990). The distinction between absolute income and
relative income is very important when talking about
retirees and non-retirees. Relative income is adjusted for
household size and other living expenses that differ
between the two groups. This explains, in part, why the
same income level may be adequate for some families and
not others. Further, this explains why similar income
Financial Counseling and Planning, Volume 9(2), 1998
76 ©1998, Association for Financial Counseling and Planning Education. All rights of reproduction in any form reserved.
levels create different levels of satisfaction at different
stages in the life cycle (Moon, 1990; Schwenk, 1990).
On average, the real disposable income of retirees may
approach that of the population at large, taking into
account smaller household size, home ownership and in-
kind income (Stoller & Stoller, 1987).
Spending and Saving Behavior
The life cycle hypothesis posits that households will
attempt to maintain a constant consumption during their
life times. To do this, they borrow during the early years
of household formation, repay debts and save during
their peak earning years, and then dissave during
retirement (Hogarth, 1989). Recent research has shown
that households do not behave exactly according to this
hypothesis and that dissaving during retirement is at a
lower level than expected (Wilcox, 1991). Nearly half of
retired households continue to save after retirement.
Factors that contribute to after-retirement saving are
uncertainties about health, length of life, and financial
security (Stoller & Stoller, 1987). Some studies have
looked at the spending behavior of older adults,
especially retirees. Like other cohorts, the elderly have
different spending behaviors depending on the level of
income and involvement in the labor market after
retirement (Moehrle, 1990).
Schwenk (1990) compared retired and employed
households aged 55 and 65 and found that retirees’
spending was two thirds that of employed households.
The study found that the retired people had a greater
inclination to purchase leisure items and health care but
a lower inclination to buy necessities and to make
charitable contributions. The older population becomes
more cautious about spending in the later stages of the
life cycle.
Stoller & Stoller (1987) found that older people are
motivated to be prudent in their daily living expenses,
saving as much as possible against the day they may
require long-term institutional care. In their study, they
compared savers and spenders and concluded that savers
were more likely to face health or functional
impairments: either their own or those of other members
of their household. Even when the elderly spend, the
study shows they spend less on transportation, clothing,
and other requirements of working life than younger
people.
Financial Satisfaction
Financial satisfaction has been used in models predicting
life satisfaction and other measures of subjective well-
being (George, 1992; Davis & Helmick, 1985). It is
logical to assert that a sense of financial well-being
depends not only upon objective and subjective measures
of the financial situation, but also on how a person
perceives objective attributes of the financial situation
after comparing those attributes against certain standards
of comparison (Porter & Garman, 1993). Financial
satisfaction refers to the subjective evaluations of the
degree to which ones financial resources are adequate
versus inadequate, or satisfactory versus dissatisfactory
(Andrew & Withey, 1976). The financial satisfaction
variable has been measured differently by various
researchers. Subjective measures have included variables
like perception of past and future financial outcomes,
perceptions of income adequacy (Keith, 1985), and
satisfaction with overall economic condition including
debt, savings, and income (Hira, 1993).
Another subjective measure that has been used to
measure financial satisfaction has been personal locus of
control. Locus of control is defined as a person’s
estimate of the possibility that a given behavior will keep
him from attaining what he is striving for. A weak sense
of personal locus of control may interfere with one’s
ability to cope with an economic situation. Objective
indicators to measure financial satisfaction include size of
levels of income, assets, savings, and net worth (Hira,
1993).
The concept of financial satisfaction has also been
measured using several items as indicators or using just
one item as an indicator, such as satisfaction with income,
satisfaction with financial situation in general, or
satisfaction with level of living. Satisfaction with
financial situation seems to be the broadest measure of
the variables, eliciting evaluations of the overall financial
situation. George (1992) concluded that both subjective
and objective measures are important in the assessment of
financial satisfaction.
Factors Influencing Financial Satisfaction
Mammen (1983) found that an individual’s perceptions of
the future affected his or her current perception of
economic well being. According to Davis and Helmick
(1985), an objective indicator of the households’ financial
circumstances, either income or net worth, has a
significant direct influence on the measure of financial
satisfaction. However, the best predictors of financial
satisfaction in their study were desire for financial
improvement and perceived change in financial condition.
Differences Between Retirees And Non-retirees
©1998, Association for Financial Counseling and Planning Education. All rights of reproduction in any form reserved. 77
Sumarwan and Hira (1993) reported that income and age
were both positively and significantly related to
satisfaction with financial status. Perception of income
inadequacy has also been found to be positively
correlated with financial satisfaction. There is consistent
evidence that older adults are more satisfied with their
overall resources than young or middle-aged adults
(Herzog & Rodgers, 1981). George (1992) found that
financial satisfaction does not decrease with length of
time since retirement. However, researchers have found
that there is less variability in financial satisfaction
among the elderly compared with the non-elderly
(Hennon & Burton, 1986).
Although financial satisfaction is positively related to
income, it is not determined by income alone. Low
income is not always associated with dissatisfaction nor
does a high income guarantee economic satisfaction.
Studies have shown that income only indirectly
influences financial satisfaction. Liang and Fairchild
(1979) assert that where income has been found to
influence satisfaction, the influencing variables have not
been explicitly considered. Liang and Fairchild also
found that relative deprivation is a useful intervening
variable between income and financial satisfaction. If an
older person has a relatively low income but believes he
is better off than his reference others, he is likely to be
satisfied. Conversely, an aged person with higher income
may be dissatisfied because he feels he is worse off than
his peers (Liang & Fairchild, 1979).
Kostelecky (1994) found that age, income, and asset
value were all significant predictors of financial
satisfaction for retirees. In this study chronic health
conditions were also found to be positively related to
satisfaction with financial situation. Large health costs
can put a heavy strain on the financial resources of the
retirees and deplete what may already be a meager
lifestyle. Kostelecky (1994) also found lower age and
higher income to be predictors of financial satisfaction
among older retirees compared with younger retirees.
Objectives of the Study
1. To establish differences in financial beliefs and
behavior between retirees and non-retirees.
2. To ascertain differences in socioeconomic and
financial factors that predict financial satisfaction for
retirees and non-retirees.
3. To ascertain if self-image and spending behavior
predicts financial satisfaction among retirees and
non-retirees.
Methods
Sample Description
The random sample was acquired through Services of
Survey Sampling of Connecticut. The questionnaires
were mailed during autumn of 1995 to 2,000 Iowans.
Approximately 11% (215) of the questionnaires were
returned incomplete because of incorrect addresses. Of
the remaining 1,785 questionnaires, a total of 540 were
completed – a response rate of 30%. Because of the
elimination of unusable questionnaires, the final number
was reduced to 529. In this study, those who indicated
that they were retired (N=111) were compared with those
who indicated they were not retired (N=418).
For the entire sample (N=529), results showed that the
mean income was $52,192 (median = $45,000), and the
mean age was 50 years (median = 48 years). Most
respondents were males (70%) and married (73%). A
majority (62%) had some college education or higher
degrees, whereas 38% had a high school education.
Fifty-four percent (54%) of the respondents were
employed outside the home while 20% reported being
retired.
Dependent Variable
Satisfaction with Financial Situation A variety of
specific measures of financial satisfaction have been used
in research. Some studies elicit self-reports of
satisfaction with one’s general financial situation, while
others tap more specific dimensions of financial
satisfaction (George, 1992). Campbell, Converse and
Rodgers (1976) suggested that domain assessments may
be more stable and probably more reliable than the more
global reports of well-being. In this study, responses
were obtained from a series of statements seeking
respondents’ satisfaction with various aspects of their
financial situation. These aspects included satisfaction
with:
1. Regular monetary savings,
2. Current debt level,
3. Family’s current financial situation,
4. Ability to meet long-term financial goals,
5. Ability to meet financial emergencies, and
6. Money management skills.
The responses were recorded on a five-point Likert Scale
ranging from 1 = Very Dissatisfied to 5 = Very Satisfied.
For descriptive statistics (chi-square), the categories were
collapsed into agree and disagree. For the inferential
statistics, the whole scale was used, and items summed,
to obtain a financial satisfaction index, (reliability
coefficient: α = .89).
Financial Counseling and Planning, Volume 9(2), 1998
78 ©1998, Association for Financial Counseling and Planning Education. All rights of reproduction in any form reserved.
Independent Variables: Socioeconomic and
Demographic Factors
Income This variable was measured by asking the
respondents to state their total household income before
taxes. Previous studies have found that there is a
nonlinear relationship between income and financial
satisfaction (Vaughan, 1980). A test for linearity was
done by plotting income residuals against residuals of
predicted values of the dependent variable. The plot
showed that the relationship between income and the
financial satisfaction was quadratic. To correct this,
income was squared. However both income and income
squared were included in the correlation matrix and
regression equation.
Marital Status: Various categories were given in the
response set. These were: married, cohabiting, single,
divorced, and widowed. Married and cohabiting were
combined into the category “Married/Cohabiting,” and
all others were combined into the category “Single.” For
the regression model, the marital status was treated as a
dummy variable with single = 0 and married = 1.
Self-image: Evaluations, perceptions, or appraisals of
situations or events in general have been associated with
individuals’ self-image and emotions (Lazarus, 1991).
This variable was measured by asking respondents how
they felt about themselves. The statements were:
1. I take a positive attitude toward myself;
2. I am a person of worth;
3. I am able to do things as well as other people; and
4. On the whole, I am satisfied with myself.
The responses were recorded on a four-point scale
ranging from 1 = Strongly Disagree to 5 = Strongly
Agree, (reliability coefficient: α = .87).
Independent Variables: Subjective Financial Factors
Comparative Financial Situation Liang et al. (1977)
referred to comparative financial situations as perceived
relative deprivation. In their study, relative deprivation
was measured by comparisons of personal income levels
with those of others, and comparisons of current with
past income. In this study, respondents were asked to
assess their family’s current financial situation compared
with:
1. Other families;
2. Their own situation five years ago; and
3. Their expectations for the future five years from the
time of the study.
These were treated as three separate variables and the
responses were recorded on a five-point Likert Scale
ranging from 1 = Much Worse to 5 = Much Better.
Financial Concerns George (1992) points out that many
aspects of financial security in later life have not been
exhaustively studied. The author hypothesized that older
adults are more likely to be concerned with their financial
security than younger adults for fear that economic
resources will be insufficient for increased future needs,
especially related to health care. This variable was
measured by asking the respondents:
1. How often they worry about their finances;
2. Whether their financial problems interfere with their
daily activities; and
3. Whether their financial problems interfere with their
relationships.
The responses were measured on a five-point Likert Scale
ranging from 1 = Never to 5 = Very Often. The three
items were summed as an index, and the reliability
coefficient was α = .84.
Spending Behavior Uncontrolled and unplanned spending
may lead to serious financial problems and feelings of
depression (Edwards, 1993). For this research,
respondents were given a series of nine items depicting
various excessive spending behaviors and were asked to
respond on a four-point scale where 1 = Strongly
Disagree and 4 = Strongly Agree. These items were
adapted from Edwards (1993) study of compulsive
buying behavior. The responses to these items were
added to form a spending behavior index on which a low
score indicates controlled spending and a higher score
indicates excessive spending. These scores were summed
to create an index of spending behavior (reliability
coefficient was α = .87).
Analysis
Descriptive statistics (means and chi squares) were
computed to establish the differences between retirees
and non-retirees. For the continuous variables, age and
income, a standard T-test was computed and used to
establish the difference between the means. For
categorical variables, the chi-square test was used to
establish the difference between the two samples.
Differences Between Retirees And Non-retirees
©1998, Association for Financial Counseling and Planning Education. All rights of reproduction in any form reserved. 79
Pearson Product Moment correlations were computed to
determine the relationship between the dependent and
independent variables, between independent variables,
and to reveal multicollinearity. Since there were no high
correlations among the independent variables,
multicollinearity was ruled out.
Independent variables correlated with the dependent
variable were entered into the regression equation as
predictor variables. Two separate regression equations
were computed for the retiree and non-retiree samples.
Results
Socioeconomic and Demographic Factors
As Table 1 shows, the retirees were significantly
different from the non-retirees in their socio-
demographic characteristics. A higher percentage of the
non-retirees reported never being married (10%),
compared with the retired respondents (3%). Most
retirees (59%), compared with non-retirees (33%) had a
high school education or lower. As expected, the mean
age for the retired group was higher (70 years), compared
with the mean age for the non retired (45 years), and this
difference was statistically significant. Similarly, the
mean household incomes for the retirees and non-retirees
were significantly different, with the retirees’ incomes
generally being less than the non-retirees’ incomes.
However, in both samples the distribution of males and
females was similar.
Table 1
Socioeconomic Characteristics of Retirees and Non-
retirees
Non-Retiree Retiree
%(N) %(N) χ2
Marital status (417) (107) 8.2*
Never married 10.3 2.8
Married/ cohabiting 75.3 75.7
Separated/ widowed/
divorced
14.4 21.5
Years of education (412) (107) 26.7 ‡
High school 32.8 58.9
Some college 30.1 20.6
Graduate level or higher 18.0 14.0
Gender (415) (104) .91 ‡
Male 76.4 80.8
Female 23.6 19.2
Mean age 45 70 t= -20.32‡
Mean income $56,360 $36,761 t= 3.59 ‡
* = significant at p<.05 ‡= significant at p<.001
Financial Beliefs and Behavior of Retirees and Non-
retirees
Retirees and non-retirees were significantly different in
their perceptions of their financial situation (Table 2).
These two groups significantly differed in their
perception of financial situations in all three areas:
Perceived financial situation compared with other
families, compared with the past, and future financial
expectations. A larger proportion of non-retirees (54%),
compared with retirees (47%), indicated that they
perceived their financial situation to be better compared
with others. A significantly larger portion of non-retirees
(67%), compared with retirees (44%), perceived their
current situation to be better than their past situations.
Similarly, a larger proportion of non retirees (69%) than
retirees (25%) expected their financial situation to
improve in the future. Based on these results, it may be
concluded that non-retirees were more likely than retirees
to report positive perceptions of their financial situation.
They felt they were financially better off compared with
the past and better off than others similar to themselves,
and more of them were optimistic about their future
financial situation.
Table 2
Perceived Comparative Financial Situations among
Retirees and Non-retirees
Non-retirees Retirees
%(N) %(N) χ2
Financial situation
compared to others
410 102 6.1*
Worse 10.0 4.9
Same 36.1 48.0
Better 53.9 47.1
Financial situation
compared to past
(413) (102) 27.0 ‡
Worse 12.3 10.8
Same 20.3 45.1
Better 67.3 44.1
Financial situation
expected in future
(414) (101) 66.9 ‡
Worse 7.2 22.8
Same 24.2 52.5
Better 68.6 24.8
* = significant at p<.05 ‡= significant at p<.001
Retirees and non-retirees were significantly different in
their financial concerns as well (Table 3). A significantly
larger proportion of retirees (40%), compared with non-
retirees (16%), indicated that they never worried about
finances, and that their worries do not interfere with their
daily life (85% versus 68%). Similarly, a significantly
higher proportion of retirees (82%) compared with non-
retirees (68%) reported that financial worries did not
interfere with their relationships.
Financial Counseling and Planning, Volume 9(2), 1998
80 ©1998, Association for Financial Counseling and Planning Education. All rights of reproduction in any form reserved.
Table 3
Financial Concerns of Retirees and Non-retirees
Non retiree Retiree
Statement %(N) %(N) χ2
Worry often about finances (416) (108) 29.3 ‡
Never 16.3 39.8
Sometimes 46.6 38.0
Often 37.0 22.2
Worries interfere with daily work (417) (107) 13.9 ‡
Never 68.1 85.0
Sometimes 23.3 14.0
Often 8.6 0.9
Worries interfere with relationships (415) (107) 11.2*
Never 68.0 82.2
Sometimes 23.6 16.8
Often 8.4 0.9
* = significant at p<.05 ‡= significant at p<.001
A majority of both retirees and non-retirees were
satisfied with various aspects of finances (Table 4).
Campbell et. al., (1976) reported that there are positive
correlations between all of the domain satisfaction
measures. People who say they are satisfied with one
aspect of life are likely to report relatively high
satisfaction where other domains are concerned. A
significantly larger proportion of non-retirees (57%) than
retirees (35%), reported that they were dissatisfied with
their savings level, and debt level (39% versus 9%).
Similarly, a significantly larger proportion of non-retirees
than retirees were dissatisfied with their general financial
situation (33% compared with 15%), and their ability to
meet financial emergencies (36% versus 15%). Given
that 76% of the retirees in this study were over 65 years,
these results are consistent with the results of Herzog and
Rodgers (1981), that older adults are more satisfied with
their financial resources than young or middle-aged
adults.
Table 4
Levels of Reported Dissatisfaction with Various Aspects
of Financial Situation
Non-retirees Retirees
Factor % (N) % (N) χ2
Level of savings 56.6 (414) 35.0 (100) 13.6 ‡
Current debt level 35.8 (411) 9.1 (99) 26.7 ‡
Current financial situation 33.2 (413) 15.7 (102) 11.9 ‡
Ability to meet long term
goals
27.8 (413) 12.9 (101) 9.7 ‡
Ability to meet financial
emergencies
35.4(413) 14.7(102) 16.2 ‡
Money management skills 30.0 (413) 19.6 (102) 4.4*
* = significant at p<.05 ‡= significant at p<.001
Spending Behavior
Most respondents, retirees and non-retirees alike, did not
engage in excessive or unplanned spending behavior.
Among those who did exhibit various types of excessive
buying behavior, the majority were non-retirees rather
than retirees. For example, a significantly higher
percentage of non-retirees (23%) compared with the
retirees (15%) reported buying without need. Though the
frequencies relating these data were small, twice as many
non-retirees as retirees (4% versus 2%) reported feeling
driven to shop even when they didn’t have time or
money. Other areas in which the groups significantly
differed included: buying what they cannot afford (non-
retirees 10%; retirees 4%), spending behavior creating
debt problems at home and work (non-retirees 13%;
retirees 4%), and shopping to celebrate (non-retirees
23%; retirees 17%).
Correlation Results
Pearson Product Moment correlations were used to
establish the relationship between the independent and
dependent variables. Results presented in Table 6 show
that for the group of non-retirees, there was a significant
and positive correlation between financial satisfaction and
various socioeconomic characteristics, age, marital
satisfaction, education, and household income. Older,
married, more educated, and those with higher incomes
reported being more satisfied with their financial situation
than those who were younger, single, less educated, or
with lower incomes. Self-image was positively related to
financial satisfaction.
Table 5
Reported Spending Behavior Among Retirees and
Non-retirees
Non retiree Retiree
Statement %(N) %(N) χ2
I buy without need (416) (107) 8.9*
Strongly disagree 34.4 49.5
Disagree 42.3 35.5
Agree 23.3 15.0
I feel driven to shop (417) (107) 7.1*
Strongly disagree 67.1 80.4
Disagree 29.0 17.8
Agree 3.8 1.9
I cannot resist sales (417) (108) 1.4
Strongly disagree 59.0 61.1
Disagree 32.6 27.8
Agree 8.4 11.1
I buy things as often as I can (417) (107) 4.3
Strongly disagree 62.6 65.4
Disagree 34.5 28.0
Agree 2.9 6.5
I am preoccupied with shopping (417) (107) 4.1
Strongly disagree 72.2 74.8
Disagree 26.6 21.5
Agree 1.2 3.7
Differences Between Retirees And Non-retirees
©1998, Association for Financial Counseling and Planning Education. All rights of reproduction in any form reserved. 81
I buy unplanned items (417) (107) .35
Strongly disagree 40.3 43.0
Disagree 38.8 38.3
Agree 20.9 18.7
My spending habits create chaos (415) (107) 5.7*
Strongly disagree 70.8 82.2
Disagree 25.1 15.9
Agree 4.1 1.9
I buy what I cannot afford (415) (107) 18.1 ‡
Strongly disagree 57.1 79.4
Disagree 32.5 16.8
Agree 10.4 3.7
My spending creates debt
problems
(415) (108) 23.1 ‡
Strongly disagree 58.6 83.3
Disagree 28.9 13.0
Agree 12.5 3.7
I have secretive shopping habits (415) (107) 8.4*
Strongly disagree 69.9 81.3
Disagree 25.1 18.7
Agree 5.1 -
I shop to celebrate (417) (107) 9.7*
Strongly disagree 40.3 57.0
Disagree 36.9 26.2
Agree 22.8 16.8
* = significant at p<.05 ‡= significant at p<.001
Table 6
Pearson Product Moment Correlations between
Financial Satisfaction and Independent Variables
Variable Non-retiree Retiree
Age .162‡ .112
Gender -.088 -.092
Marital status -.125* .076
Education .114* .094
Income .102* .100
Self-image .395‡ .409‡
Financial concerns -.641‡ -.635‡
Perceived financial situation compared
with other families
.639‡ .492‡
Perceived financial situation compared
with the past
.480‡ .354‡
Future financial expectations .078 .386*
Income .249‡ .244*
Spending behavior -.367‡ -.208*
* = significant at p<.05 ‡= significant at p<.001
Satisfaction with current financial situation was higher
among those who perceived their financial situation as
better compared with others. Similarly, the perception
that the current financial situation is better than past
financial situations was positively correlated with
financial satisfaction. There was a significant and
negative relationship between worry about finances and
satisfaction with financial situation, indicating that those
who reported being worried about finances were less
satisfied with their financial situation.
Similarly, significant and negative correlation between
the spending behavior index and satisfaction with
finances, indicating that those who reported excessive or
unplanned spending behavior were less satisfied with
their financial situation.
Among retirees, financial satisfaction was significantly
correlated with respondents’ perception of their
comparative situation. They were more satisfied if they
perceived their financial situation to be better than others,
or their financial situation to be better than the past,
Financial satisfaction was negatively related to financial,
and spending behavior. However, satisfaction with
finances was positively and significantly related to self-
image. For the retirees, unlike the non-retirees,
perceived future financial expectations were significantly
related to financial satisfaction. Retirees who expected
their future financial situation to improve, reported being
more satisfied with their current financial situation. On
the other hand, respondents who had financial concerns,
low self-image, or excessive spending behavior were less
satisfied with their financial situation.
Unlike the non-retired sample, age, marital status, and
education were not significantly correlated with financial
satisfaction. However, perceived financial expectations
were strongly correlated with financial satisfaction for the
retirees but not for the non-retirees, implying that those
non-retired and therefore mostly younger respondents
were not worried about their future financial situation.
Regression Results
Stepwise regression analyses were used to ascertain
factors that are significant in predicting financial
satisfaction among the retirees and non-retirees. For the
non-retirees (Table 7) 60% of the variance in the level of
satisfaction was explained by variables included in the
final regression model. The regression model was
significant The significant variables were: perception of
financial situation compared with others, perceptions of
financial situation compared with the past, current
financial concerns, and spending behavior. These findings
suggest that a sense of financial well-being depends not
only upon objective and subjective measures of financial
situation, but also on how a person perceives objective
attributes of the financial situation after comparing those
attributes against certain standards of comparison: like
peer groups and past financial experience. These results
are consistent with findings reported by Porter and
Garman, (1993). They concluded that subjective, value-
related perceptions of the financial situation provide
insights into the variability of self-reported levels of
Financial Counseling and Planning, Volume 9(2), 1998
82 ©1998, Association for Financial Counseling and Planning Education. All rights of reproduction in any form reserved.
financial well-being. Financial concerns explained 37%
of the variance in financial satisfaction. Another
significant predictor of financial satisfaction among the
non-retirees was spending behavior. Results showed that
excessive or unplanned spending behavior resulted in
dissatisfaction with financial situations. This is an
important finding because it means that those who
practice excessive buying behavior are not satisfied with
their financial situation, yet they still adhere to those
buying behaviors. This finding does not support findings
by Wilhelm et al. (1993), that people who believe in
spending are more likely to be satisfied, that spending
money made people feel good or powerful, and therefore
more satisfied.
The regression model for the retirees was also
significant. However, only three variables in the model
were significant in predicting financial satisfaction.
These were perceptions of financial situation compared
with other families, financial concerns and spending
behavior. For the non retirees, spending behavior
explained 37% of the variance while for the retirees,
spending behavior explained 23% of the variance. This
denotes that spending behavior is a stronger predictor of
financial satisfaction among the non retirees compared to
the retirees. The fact that socioeconomic factors were
not significant predictors of financial satisfaction for
either retirees or non-retirees has important implications.
Results emphasize subjective nature of financial
satisfaction which is predicted mostly by perceptions of
one’s self, and perceptions of one’s self in reference to
either other groups or times. The variance explained by
the hypothesized predictors for the retirees was also 61%.
Table 7
Predictors of Financial Satisfaction for Retirees and
Non-retirees
Non-retirees Retirees
Predictors Beta Beta
Perceived financial situation compared
with other families
.321 ‡ .327 ‡
Perceived financial situation compared
with past
.165 ‡ -
Financial concerns -.384 ‡ -.503 ‡
Spending behavior -.367 ‡ -.233*
F test 132.86 ‡ 19.36 ‡
R2.604 .532
* = significant at p<.05 ‡= significant at p<.001
Neither income nor income squared were significant in
predicting financial satisfaction. Although income is
correlated with financial satisfaction, it only becomes a
significant predictor through intervening variables. It
appears that financial satisfaction was a function of
perceived discrepancies between financial aspirations and
economic achievements. George (1992) suggested that
for older people, financial satisfaction appeared to be a
function of the degree to which older persons feel
deprived relative to their peers and to their past economic
status. Future studies should identify other intervening
variables that mediate the relationship between
socioeconomic factors and financial satisfaction.
Conclusions and Implications
Based on the results of this study, it can be concluded that
two groups of respondents, non-retirees and retirees,
differed in some of their financial beliefs and behaviors.
Despite the reported lower mean income among the
retirees, more retirees than non-retirees were satisfied
with their current financial situation. Vaughan (1980)
also reported similar findings -- that income is not
linearly related to financial satisfaction.
In this study, even though self image was not found to be
a predictor of financial satisfaction, it was found to be
highly and significantly correlated with financial
satisfaction. The importance of self-image as a predictor
of financial satisfaction among the non-retirees was an
important finding with significant implications for
financial advisors and educators. Assessment of self-
image, factors that influence self-image, and strategies to
build self-image, are areas that should be addressed.
Financial advisors should guard against overlooking
clients’ self-esteem or self-image and financial beliefs
(subjective factors) and not concentrate on objective
factors such as clients’ income, debt, savings, etc.
Other factors that significantly predicted financial
satisfaction for the non-retirees included perceptions of
financial situation compared with others and in relation to
the past. This finding is similar to findings reported by
George (1992), indicating that relative deprivation causes
financial dissatisfaction despite the respondents’ level of
financial resources. Perception of a future financial
situation was not found to be a predictor of financial
satisfaction for the retirees or non-retirees. Evidently,
people were more worried about their immediate needs,
and satisfaction of those needs, rather than what the
future may bring. Stoller and Stoller (1987) noted that
older, retired persons cannot adequately anticipate their
financial expenses because of uncertain longevity and
unpredictable health problems. It is not surprising then,
that those who perceived their future financial situation as
positive were more satisfied with their financial situation.
It may be that the retirees approach the future with
concern about their declining health and the increased
Differences Between Retirees And Non-retirees
©1998, Association for Financial Counseling and Planning Education. All rights of reproduction in any form reserved. 83
costs that follow, rather than specifically focusing their
concern on finances. Among the retirees, two variables,
perception of current financial situation compared with
the past and financial concerns, were significant
predictors of financial satisfaction. Though the variable,
financial concern, was a significant predictor for both
retirees and non-retirees; it explained more variance in
financial satisfaction among the retirees compared with
the non-retirees.
This study has established that financial satisfaction
among retirees and non-retirees is a function of
perception of comparative financial situation, and
spending behavior. For both the retirees and non
retirees, financial concern , spending behavior and
perception of comparative financial situation were
significant predictors of financial satisfaction. Advice
related to spending behavior should therefore focus more
on both the employed and the retired. These findings
make an important point for financial advisors and
educators: though both the retired and the non retired
differ in some financial beliefs ans behaviors, the factors
predicting financial satisfaction were the same for the
two groups; therefore, when advising or developing
educational materials, both groups must be considered.
Due to the high predictive value of financial concern
among the retirees, Practitioners interested in serving
retirees may want to focus on understanding what
financial concerns retirees have and helping them reduce
those concerns.
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