Navigating risk: Impact of overconfidence in financial literacy on retirement wealth reserves

This study examined the impact of overconfidence in financial literacy on risky asset investments within retirement wealth reserves. We used data of 36,268 respondents of the "China Aging Finance Survey" (2020-2022). The findings reveal that overconfidence significantly drives households toward riskier investments, and the conclusions were reinforced through robustness checks. Furthermore, the effect was moderated by pension replacement rate satisfaction, willingness to pay for financial advice, and risk preferences. Heterogeneity analysis indicates that male respondents and less educated respondents were significantly affected by overconfidence. Moreover, respondents with basic pension insurance were likelier to opt for risky assets.