Inaction inertia in retirement saving

J.M.T. Krijnen*, M. Zeelenberg, S. Breugelmans, Marijke van Putten

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In retirement saving, many people miss out on early opportunities to save and subsequently fail to take adequate actions for a long time thereafter. We examined whether these two observations—the initial failure to act and the subsequent inertia— could be related through the phenomenon of inaction inertia. In Experiment 1(N = 180), participants were less likely to save for retirement when the difference in annual return between the current opportunity and the missed opportunity was large versus small. In Experiment 2 (N = 180), participants were less likely to start saving for retirement when reminded of a missed opportunity 10 years ago versus 1 year ago. These data constitute the first demonstration of inaction inertia in retirement saving: People's reluctance to act on attractive saving opportunities may be induced by their previous inaction. In Experiment 3 (N = 340) and Experiment 4 (N = 628), we find that the observed inertia is the product of a tendency to underestimate exponential growth combined with a focus on past opportunities. Building on this mechanism,
Experiment 5 (N = 916) provided evidence for a potential remedy; the inaction
inertia effect completely disappeared when focus was shifted from required contributions to future outcomes.
KEYWORDS: growth bias, inaction inertia, inertia, missed opportunities, retirement saving
Original languageEnglish
Number of pages11
JournalJournal of Behavioral Decision Making
DOIs
Publication statusAccepted/In press - 2019

Fingerprint

retirement
experiment
remedies
Inertia
Retirement saving
Retirement
Experiment
trend
evidence

Keywords

  • AVOIDANCE
  • CONSEQUENCES
  • DISCOUNTS
  • MISSED OPPORTUNITY
  • REGRET
  • VALUATION
  • exponential growth bias
  • inaction inertia
  • inertia
  • missed opportunities
  • retirement saving

Cite this

@article{628770fde7904d4992674c6603192ba9,
title = "Inaction inertia in retirement saving",
abstract = "In retirement saving, many people miss out on early opportunities to save and subsequently fail to take adequate actions for a long time thereafter. We examined whether these two observations—the initial failure to act and the subsequent inertia— could be related through the phenomenon of inaction inertia. In Experiment 1(N = 180), participants were less likely to save for retirement when the difference in annual return between the current opportunity and the missed opportunity was large versus small. In Experiment 2 (N = 180), participants were less likely to start saving for retirement when reminded of a missed opportunity 10 years ago versus 1 year ago. These data constitute the first demonstration of inaction inertia in retirement saving: People's reluctance to act on attractive saving opportunities may be induced by their previous inaction. In Experiment 3 (N = 340) and Experiment 4 (N = 628), we find that the observed inertia is the product of a tendency to underestimate exponential growth combined with a focus on past opportunities. Building on this mechanism,Experiment 5 (N = 916) provided evidence for a potential remedy; the inactioninertia effect completely disappeared when focus was shifted from required contributions to future outcomes.KEYWORDS: growth bias, inaction inertia, inertia, missed opportunities, retirement saving",
keywords = "AVOIDANCE, CONSEQUENCES, DISCOUNTS, MISSED OPPORTUNITY, REGRET, VALUATION, exponential growth bias, inaction inertia, inertia, missed opportunities, retirement saving",
author = "J.M.T. Krijnen and M. Zeelenberg and S. Breugelmans and {van Putten}, Marijke",
year = "2019",
doi = "10.1002/bdm.2145",
language = "English",
journal = "Journal of Behavioral Decision Making",
issn = "0894-3257",
publisher = "John Wiley and Sons Ltd",

}

Inaction inertia in retirement saving. / Krijnen, J.M.T.; Zeelenberg, M.; Breugelmans, S.; van Putten, Marijke.

In: Journal of Behavioral Decision Making, 2019.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Inaction inertia in retirement saving

AU - Krijnen, J.M.T.

AU - Zeelenberg, M.

AU - Breugelmans, S.

AU - van Putten, Marijke

PY - 2019

Y1 - 2019

N2 - In retirement saving, many people miss out on early opportunities to save and subsequently fail to take adequate actions for a long time thereafter. We examined whether these two observations—the initial failure to act and the subsequent inertia— could be related through the phenomenon of inaction inertia. In Experiment 1(N = 180), participants were less likely to save for retirement when the difference in annual return between the current opportunity and the missed opportunity was large versus small. In Experiment 2 (N = 180), participants were less likely to start saving for retirement when reminded of a missed opportunity 10 years ago versus 1 year ago. These data constitute the first demonstration of inaction inertia in retirement saving: People's reluctance to act on attractive saving opportunities may be induced by their previous inaction. In Experiment 3 (N = 340) and Experiment 4 (N = 628), we find that the observed inertia is the product of a tendency to underestimate exponential growth combined with a focus on past opportunities. Building on this mechanism,Experiment 5 (N = 916) provided evidence for a potential remedy; the inactioninertia effect completely disappeared when focus was shifted from required contributions to future outcomes.KEYWORDS: growth bias, inaction inertia, inertia, missed opportunities, retirement saving

AB - In retirement saving, many people miss out on early opportunities to save and subsequently fail to take adequate actions for a long time thereafter. We examined whether these two observations—the initial failure to act and the subsequent inertia— could be related through the phenomenon of inaction inertia. In Experiment 1(N = 180), participants were less likely to save for retirement when the difference in annual return between the current opportunity and the missed opportunity was large versus small. In Experiment 2 (N = 180), participants were less likely to start saving for retirement when reminded of a missed opportunity 10 years ago versus 1 year ago. These data constitute the first demonstration of inaction inertia in retirement saving: People's reluctance to act on attractive saving opportunities may be induced by their previous inaction. In Experiment 3 (N = 340) and Experiment 4 (N = 628), we find that the observed inertia is the product of a tendency to underestimate exponential growth combined with a focus on past opportunities. Building on this mechanism,Experiment 5 (N = 916) provided evidence for a potential remedy; the inactioninertia effect completely disappeared when focus was shifted from required contributions to future outcomes.KEYWORDS: growth bias, inaction inertia, inertia, missed opportunities, retirement saving

KW - AVOIDANCE

KW - CONSEQUENCES

KW - DISCOUNTS

KW - MISSED OPPORTUNITY

KW - REGRET

KW - VALUATION

KW - exponential growth bias

KW - inaction inertia

KW - inertia

KW - missed opportunities

KW - retirement saving

U2 - 10.1002/bdm.2145

DO - 10.1002/bdm.2145

M3 - Article

JO - Journal of Behavioral Decision Making

JF - Journal of Behavioral Decision Making

SN - 0894-3257

ER -