You don’t need to be a physicist to know that Sir Isaac Newton’s first law of motion is: “Objects at rest tend to stay at rest unless acted upon.”
This is Newton’s description of inertia — and it’s also a law referenced recently at the Center for Retirement Research by research fellow Geoffrey T. Sanzenbacher, who is also a professor of economics at Boston College. Sanzenbacher unpacked recent research on how inertia can affect retirement savings efforts.
Ultimately, he found that inertia can both help and hurt your efforts in saving for your future — it all depends on the way you’re managing your accounts.
The ‘Newton rule’ shows that inertia can help you save for retirement
As the Center for Retirement Research explains, inertia can either work for you or against you. Because people tend to stick to the status quo, employers are trying to help workers by automating best practices, detailed below.
| Header Cell – Column 0 |
For You (Best Practices) |
Against You |
|---|---|---|
|
Scenario 1 |
Your employer auto-enrolls new workers in company 401(k) plans. |
You’re not auto-enrolled in a 401(k), and you don’t make the effort to enroll. |
|
Scenario 2 |
Your plan automatically increases contributions over time. |
You’re auto-enrolled in a 401(k) with a low contribution level, and you don’t make changes. |
|
Scenario 3 |
Your employer automatically enrolls plan participants in target date funds so their asset allocation adjusts appropriately over time. |
You’re auto-enrolled in a 401(k) with the wrong investments or you don’t choose target date funds. |
The key is for the default, or the easy option, to be the one that sets people up for success in retirement, rather than leaving them to fail.
If your employer has followed these best practices, you can probably sit back and relax. But even if you have to take the initiative to enroll yourself, read on — because once your account is set up, staying on the couch might be your best strategy.
Inertia might help you avoid investing mistakes
The Center for Retirement Research identified another way that inertia can help bolster your retirement savings. It helps people resist the instinct to become overly conservative in their investments as they age and approach retirement.
Becoming more risk-averse as you get closer to retirement can be a good thing. You don’t want to have your entire portfolio in stocks (or equities) when you need to start making withdrawals in a year or two. That kind of asset allocation could backfire in the event of a market crash, forcing you to withdraw money at a bad time and lock in losses — a retirement fumble known as the sequence of returns risk.
However, research on how older savers view equity investing and whether they act on their beliefs found that retirement savers often failed to gauge market risk properly. In a survey of U.S. adults ages 48 to 78 with $100,000 or more in investable assets, researchers found that these individuals were often overly pessimistic about the stock market. They would choose a far more conservative portfolio than they should.
The chart below shows three commonly recommended glide paths for target date funds for the 20 years before and after retirement: aggressive, moderate and conservative.
“Glide paths” are formulas that show how a portfolio will gradually reduce the percentage of investments in stocks and increase the percentage of safer investments over time. Vertical lines show that people want to invest in a lower percentage of stocks than the glide paths recommend, especially early in their careers.
(Image credit: Aubry, Jean-Pierre and Yimeng Yin. 2025. “Why Do Desired Stock Allocations Differ from Actual Holdings?” Issue in Brief 25-17. Chestnut Hill, MA: Center for Retirement Research at Boston College.)
As Sanzenbacher pointed out, if older investors followed their desired investment asset allocation plan based on their risk aversion, their investment mix would fall below the most conservative recommended glide path. This is true even among pre-retirees who are relatively aggressive in their preferred investment strategy compared with older investors.
Sanzenbacher said that “If these savers acted like they said that they would like to, their pessimism would be causing them to give up valuable returns.”
The good news, however, is that most people don’t adjust their asset allocation to reflect their risk tolerance. In fact, while participants, on the whole, said they wanted 37% of their retirement assets in equities, the average they actually had invested was higher and much closer to the recommended moderate glide path.
Pre-retirees, in other words, benefited by not adjusting their portfolios to their preferred asset allocation — and that’s most likely because of inertia. Since many of the plan participants were invested in target date funds, they stayed in those funds with the appropriate investment mix instead of switching to the more conservative investments they claimed they preferred.
A lack of action saved these investors from their own fear of the market and allowed them to remain appropriately invested.
Can — and should — you make inertia work for you?
Doing nothing can be helpful in many ways in retirement investing.
If you set up large automatic 401(k) contributions early and make auto-increases the default, you’ll be more likely to hit your investment goals.
You’re also less likely to panic sell if the market starts to decline. Since investing for the long term is one of the best and most proven strategies for growing wealth, you’re probably more likely than very active investors to win in the market.
“Being hands-off with your retirement account might not always be a bad thing,” says Trevor Houston, founder and CEO at ClearPath Wealth Strategies. “Constantly changing your account whenever the market goes up or down could create issues for you.”
At the same time, a target date fund comes with higher fees than many other investments and isn’t necessarily as effective at helping you achieve your retirement targets as a personalized plan would be.
Plus, as Houston points out, “The target date fund doesn’t know you just got laid off. It doesn’t know when you plan to retire, what other investments you have, how much risk you want to take or what changes have occurred in your life.”
Ultimately, it comes down to how confident you are that you can make the right moves, rather than acting based on fear, emotion or short-term thinking.
If you’re working with a financial planner or investment adviser to refine your goals, optimize your finances, and select the right investments, being more active in growing your retirement savings could leave you better off. If you’re acting on your own and making choices based on emotion, then inertia or inaction could serve you better.
Before you decide whether to act upon your retirement savings, carefully consider whether the moves you’re making are better than no moves at all.
Houston thinks ultimately, you don’t want to be too passive when it’s your retirement nest egg on the line.
“Being hands-off might keep you from reacting emotionally to the market,” he says, “but being hands-off doesn’t mean you [shouldn’t] know what’s going on. When your life changes significantly, take some time to reevaluate your retirement plan and determine if your previous decisions still make sense.”
