Inaction inertia in retirement saving

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.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.


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