1. Introduction
Since China officially entered the aging society in 2000, the speed of population aging has been increasing. The proportion of elderly people aged 65 and above has rapidly increased from 6.96% in 2000 to 14.9% by the end of 2022, and the rate of increase is getting faster and faster. From 2010 to 2020, the population aged 65 and above increased by 4.63%, an increase of 2.72% compared to the previous decade. According to the prediction of the United Nations, the elderly population aged 65 and above in China will increase to around 30% by 2060 and will be in a period of long-term aging plateau [
1]. From 2000 to 2050, the global population aging level will increase by 12%, while China’s population aging level will increase by 24% during the same period. It is expected that China’s elderly population will reach 480 million by 2050, accounting for about 2/5 of the elderly population in Asia. Compared with developed countries, China’s aging population is not only “early” but also “fast”, and there is a trend of acceleration in the future [
2,
3,
4].
The degree of aging in rural areas of China is significantly higher than that in urban areas. The seventh population census data (2020) show that the proportion of elderly people aged 60 and above and aged 65 and above in rural areas is 23.81% and 17.72%, respectively, which is 7.99% and 6.61% higher than those in urban areas. Moreover, urbanization, family planning, and advances in medical technology have accelerated the growth rate of the proportion of rural elderly population [
5,
6]. According to the age migration structure of the population census, the proportion of elderly people aged 65 and above in rural areas will reach 46.4% of the total population by 2050, which is 2.1 times that of urban areas. Among them, the proportion of empty-nest elderly people in rural areas will reach 26.1%, which is 2.9 times that of urban areas.
At the same time as the aging population intensifies, pension funds are barely sufficient to meet the elderly care needs of rural residents. At present, China’s pension system consists of three pillars: pillar I; is basic pension insurance, pillar II is enterprise annuity, and pillar III is personal retirement savings. Among them, pillar I of basic pension insurance is a state system established and implemented by the state in accordance with laws and regulations, including basic pension insurance for urban and rural residents, basic pension insurance for urban employees, and basic pension insurance for government agencies and institutions. The first type is basic pension insurance for urban and rural residents who do not have fixed jobs, while the latter two types of basic pension insurance cover residents working in urban enterprises and government institutions, respectively. Pillar II refers to a supplementary pension system voluntarily established by enterprises based on their own economic strength and status, outside the national pension system, to provide a certain degree of retirement income security for their employees. It can be seen that pillar II of China only involves employees of large companies, and the proportion of residents living in rural areas can be almost negligible. Therefore, in addition to voluntary savings, rural residents can only rely on the basic pension insurance for urban and rural residents in pillar I. Although they can receive pension after the age of 60, the amount they receive is quite low. According to data from the National Bureau of Statistics in 2022, the monthly per capita pension for rural elderly in China is only CNY 189, which is insufficient to meet the elderly care needs of rural residents.
In order to actively respond to the aging population and alleviate the economic pressure of retirement life, since 2006, the State Council, China Securities Regulatory Commission, China Banking and Insurance Regulatory Commission, and other departments have intensively introduced various policies to encourage people to save for retirement. However, numerous studies have shown that China’s residents’ retirement savings are insufficient and have a single structure, mainly relying on bank savings [
7,
8,
9]. Moreover, the actual and subjective evaluation of the economic security of rural elderly people is lower than that of urban elderly people [
10]. According to relevant data, 73.3% of urban elderly people believe that they have the financial ability to live a good retirement life, while 54.5% of rural elderly people believe so [
11]. The actual proportion of urban elderly people with retirement savings is 80.9%, while the proportion of rural elderly people is only 5.3%, which is significantly lower than that of urban elderly people [
12]. Zhang et al. [
13] found that, compared to urban elderly people, the proportion of rural elderly people making retirement plans in advance is lower, and most rural elderly people choose bank savings. Chen et al. [
14] found that 59% of Chinese believe they are unable to save enough money for retirement, and the proportion of rural people making retirement financial preparations is only half that of urban people. Sun et al. [
15] found that the level of retirement saving of urban residents is higher than that of rural areas.
What is the reason for the higher degree of aging in rural areas but the lower level of retirement savings compared to cities? Some scholars analyze it based on individual, household, and social characteristics, as well as other reasons. According to the theory of investment management, income, as the representative of residents’ economic ability, plays a key role in retirement saving. The life-cycle hypothesis believes that rational consumers will arrange their consumption according to their lifetime income and hope that consumption in each period can be stable, so that total consumption equals to total income. When they have the ability to work, they will use part of their income for savings as a source of financial support in old age. However, exploring the relationship between “income level” and retirement saving alone does not seem to yield satisfactory results. The preventive savings theory provides a good explanatory framework for us to further explore the relationship between the two. This theory points out that people should consider both current income levels and future income uncertainty when making consumption and savings decisions. Based on the above reasons, this paper explores the impact of income level and income uncertainty on retirement saving. Different from existing literature, this paper categorizes retirement saving behavior into three aspects: “retirement saving decision”, “retirement saving amount”, and “retirement saving way choice”.
2. Theoretical Analysis and Hypotheses
The relationship between income level and savings has been widely recognized. Keynes’ theory of national income determination states that savings increase with income levels, and the marginal propensity to save increases. The persistent income hypothesis divides income into persistent income and temporary income. Persistent income refers to predictable and continuous income, while temporary income refers to occasional income. Consumption mainly comes from persistent income, and the majority of temporary income is used for savings. Both theories mentioned above demonstrate that income determines savings. Scholars have also conducted extensive empirical research on the relationship between income level and savings, and, whether from a macro or micro perspective, income level positively affects savings [
16,
17,
18,
19]. The low income level leads to a relatively small share of rural residents’ income that can be used for savings, resulting in a smaller marginal propensity for savings [
16], and the increase in rural savings rate mainly stems from the increase in income [
17]. The difference in income will affect household savings and asset holdings [
18], and it has a significant positive impact on household stock, fund, and bond participation [
19].
The direct impact of income level on retirement savings can be traced back to the life-cycle hypothesis, which believes that rational consumers will arrange consumption according to their lifetime income and hope that consumption in each period can be stable, so that total consumption is equal to total income. When they have the ability to work, they will use part of their income to save as the source of financial support in old age. That is to say, income level will positively affect the retirement savings. The empirical analysis results also show that an increase in income level will positively affect the participation probability in the government-sponsored retirement plan, commercial endowment insurance, retirement plan, etc. Early surveys targeting the United States showed that, the higher the income level, the higher the amount paid in the retirement savings [
20]. Hong et al. [
21] found that the monthly income level of households is an important factor affecting the financial preparation of middle-aged people for retirement, based on data from the 2015 National Household Survey in South Korea. Some studies have shown that income levels or economic conditions are important factors affecting residents’ willingness to participate in voluntary retirement savings plans [
22,
23]. The contribution amount of supplementary retirement savings plans for lower-income groups is very low, and there is even no plan for retirement [
24,
25]. Yao et al. [
26] pointed out that only 11.3% of people with incomes below USD 16,000 have personal retirement plans, while 66.5% of people with incomes equal to or greater than USD 60,000 have personal retirement plans. High-income individuals are more willing to make retirement financial plans [
27,
28]. Compared to residents with incomes below USD 25,000, high-income individuals are 11% to 14% more likely to participate in additional retirement savings plans [
29].
The income level can also have an indirect impact on the retirement saving behavior through influencing financial literacy, risk attitude, etc. On the one hand, an increase in income level will increase an individual’s financial literacy level. Financial literacy is a necessary determining factor when people make investment decisions, and it will increase the probability of making retirement savings plans [
30]. On the other hand, residents with higher income levels are more able to bear the losses caused by investment, that is, the stronger their risk preference. And risk preference is a factor that cannot be ignored in investment decisions. Research shows that, the stronger the degree of risk preference, the higher the likelihood of making a retirement plan [
31]. In addition, individuals with high income levels place more emphasis on investment, have longer life expectancy, pay more attention to the retirement life quality, and require higher retirement economic costs. Therefore, they will save more retirement assets.
Based on the above analysis, this paper proposes the following hypothesis:
Hypothesis 1: Income level will affect the retirement saving behavior.
Dreze et al. [
32] first studied the impact of income uncertainty on investment portfolio. They found that, when the financial market is imperfect, income uncertainty can affect residents’ investment portfolio. This conclusion is consistent with the preventive savings theory, which points out that consumers not only save based on current income, but also increase savings to prevent future uncertainty, namely, preventive savings, which mainly comes from income fluctuations. The expected future consumption marginal utility under uncertainty is greater than the marginal utility under certainty. The greater the uncertainty of income, the stronger the willingness to save for prevention. Subsequently, the random walk hypothesis, liquidity constraint hypothesis, and buffer inventory hypothesis, which emerged under uncertain conditions, all confirmed the importance of income uncertainty in savings.
The increase In income uncertainty will increase residents’ holdings of safety assets and reduce the holding of risky assets [
33,
34]. The purpose of retirement saving is to maintain the principal and increase the value of retirement financial assets. Compared with other investments, retirement saving is less speculative and has lower risk, making it a kind of safe asset. Therefore, the higher the uncertainty of income, the more inclined it is to increase the holding of retirement savings. Campbell et al. [
35] found that heterogeneity of labor income risks strongly affects the optimal investment portfolio within the life cycle. Higher income uncertainty can induce individuals to save more in the early stages of their life cycle, but in the later stages of their working life, people may change their savings patterns [
36]. Some empirical research results also show that an increase in income uncertainty will increase the likelihood of social security, a retirement financial investment. Li et al. [
37] pointed out that the frequency of job changes has a negative impact on the probability of retirement insurance for urban employees, meaning that, the higher the income uncertainty, the more willing they are to continue participating in a government-sponsored retirement plan. Sun et al [
38] found that, the greater the income risk, the greater the probability of having retirement financial investments.
The main reasons for the positive impact of income uncertainty on retirement saving are as follows. On the one hand, individuals with stable labor income often have better welfare benefits and higher pensions and are unwilling to make additional retirement savings. On the other hand, income uncertainty may affect risk attitudes and further affect retirement savings. Bonin et al. [
39] found that individuals with a high level of risk preference are more likely to choose jobs with high income uncertainty, while individuals who are unwilling to take risks are more likely to work in industries with low income uncertainty. Hartog et al. [
40] found that, the lower the uncertainty of income, the stronger the risk tolerance and the lower the demand for related risk avoidance products, indicating a lower probability of making low-risk investments such as buying retirement financial products.
Based on the above analysis, we believe that income uncertainty will have an impact on the retirement saving behavior, and we propose the following hypothesis:
Hypothesis 2: Income uncertainty will affect the retirement saving behavior.
The above analysis indicates that both income level and income uncertainty positively affect residents’ retirement saving behavior, but whether there is an interaction between the two is worth further exploration. On the one hand, residents with high income levels have strong economic capacity for retirement saving and can have sufficient money to prepare for their retirement. However, if income uncertainty is low, it means they have stable work and income levels, and they have low risk-aversion awareness and, thus, reduced willingness to save for retirement. On the other hand, residents with high income uncertainty lack a sense of economic security and have a strong willingness of preventive savings. They will increase their retirement savings. If their income level is high, their strong economic ability will strengthen the level of savings. Based on the above analysis, we think that income level and income uncertainty will have an impact on the behavior of retirement saving, and there may be an interactive mechanism. Based on the above analysis, this article proposes the following hypothesis:
Hypothesis 3: There is an interactive effect of income level and income uncertainty on the retirement saving behavior.
5. Conclusions and Policy Implications
This paper found that, as income levels increase, residents are more likely to save for retirement and have a larger scale of savings. The potential of the future retirement financial market will be enormous in rural China. The greater the uncertainty of rural residents’ income, the more aware they are of the necessity to prepare materially for retirement, and the more likely they are to engage in retirement saving. It indicates that Chinese rural residents have a strong sense of preventive storage and will prepare retirement financial assets based on their own income uncertainty. This has positive significance for alleviating the economic pressure of aging. Looking at the impact of income on the retirement saving way choice, income levels have a negative impact on the choice of bank savings while having a positive impact on the choice of real estate. Income uncertainty has a negative impact on the choice of bank savings while having a positive impact on the choice of stocks or funds.
Based on the above conclusions, we provide the following policy recommendations: (1) Increase government financial subsidies and tax preferences to improve the enthusiasm of rural residents to save for retirement. Income level has a significant positive impact on the decision making and amount of retirement savings. Improving the participation ability of residents in retirement saving is particularly important. Therefore, we should actively promote tax preferences, such as expanding the scope of tax-deferred endowment insurance, giving residents who purchase commercial endowment insurance certain tax preferences, referring to the implementation of such products, and extending the scope to bank savings, funds, stocks, and other retirement financial markets to provide residents with tax preferences. (2) Optimize retirement financial products. Residents with high income uncertainty have a higher probability and amount of retirement savings, mainly in order to prevent future income risks, which also shows that they have a high degree of risk avoidance. Therefore, when designing retirement financial products, financial institutions should timely understand the residents’ financial needs for retirement, identify the risk tolerance of consumers, design various types of retirement financial products that meet the retirement needs and risk preferences of residents, and comply with the characteristics of residents’ life cycle. It is recommended to design exit mechanisms based on the age, health status, and unemployment status of investors to prevent uncertain income risks. (3) Financial institutions should focus on promoting retirement financial products to rural residents with high income levels and income uncertainty. These people are a potential group in the retirement financial market. (4) The government should closely monitor rural residents with low income levels and income uncertainty and provide retirement financial education. Residents with low income levels and income uncertainty have a small possibility for and amount of retirement savings. This means that these residents have inadequate retirement financial savings, so it is necessary to provide them with retirement financial education to raise awareness of the severity of population aging. (5) Banks, real estate agents, and fund companies should provide differentiated retirement financial products. The impact of income level on rural residents’ bank savings choices is negative, while the impact on real estate choices is positive; the impact of income uncertainty on rural residents’ bank savings choices is negative, while the impact on stock or fund choices is positive. In other words, bank savings are more attractive to rural residents with lower income levels and higher income uncertainty, while real estate is more attractive to rural residents with higher income levels. Therefore, banks should target rural residents with lower income levels and higher income uncertainty and promote the use of bank savings for retirement asset preservation. Residents with higher income levels and unstable incomes are less likely to choose bank savings for retirement asset preservation. Therefore, suitable bank savings products should be designed for these groups, such as longer-term products with higher risk–reward ratios to attract them. Real estate agents should target residents with higher income levels for promotion. Stocks, funds, and other institutions should target residents with higher income uncertainty for promotion to increase their enthusiasm for choosing these products. Residents with more stable incomes are less likely to choose stocks or funds for retirement asset preservation. Therefore, products suitable for them should be designed, such as money funds and bond funds with relatively lower risk–reward ratios.