Falling for the Trap: Status Quo Trap

Handle your business! If you have not already done so, you need to take action today to ensure for your retirement. The cold, hard truth is that your retirement account is not going to manage itself. (That is unless you are regularly investing in a target date mutual fund. If that is the case, pat yourself on the back.)

This begs the question: "If investing for retirement is so important, why do so many people fail to do it?" An article in the Harvard Business Review claims the simple answer: because they are already not doing it. That is, you are more likely to continue doing something (or not doing something) if you are already doing that something (or not doing that something). The phenomenon is called the Status Quo Trap or Status Quo Bias.

"If investing for retirement is so important, why do so many people fail to do it? ...because they are already not doing it."

Think about it. What are you going to to today? Probably the same thing you did yesterday (unless you are reading this on a Monday). What are going to eat for dinner? Which television show are you going to watch - or not watch? Which route are going to drive to get to work? Human behavior is essentially predictable because it operates on preexisting patterns. This phenomenon applies to investing (Hammond et. al).

"...avoid exaggerating the work required to make the change"

So, how does one make a change - or for the subject of our conversation - how does one make a change that will ensure for security in retirement? Hammond et. al suggest avoid exaggerating the work required to make the change. Yes, you will have to make a few phone calls, fill out some forms, and will even need to mail said forms. (Who still mails anything nowadays?) It sounds arduous. It sounds complicated. Wait - no it doesn't. It sounds like a piece of cake. So get on it!