The 'Second Law' of Retirement Rules

The second law of thermodynamics inspires this retirement rule, because “You do not rise to the level of your goals. You fall to the level of your systems.”

Inspired by Thermodynamics, Rooted in Reality

By Steven Orlowski, CFP, CNPR

Retirement planning, at its core, is a balance between ambition and discipline. We set lofty goals: to travel, to spoil the grandkids, to live free of financial stress. Yet, despite our best intentions, too many people fall short of their retirement dreams—not because they aimed too low, but because they relied too much on aspiration and not enough on structure.

This brings us to what I call the “Second Law” of Retirement Rules, a concept inspired by the second law of thermodynamics—and borrowed insightfully by author James Clear in Atomic Habits:

“You do not rise to the level of your goals. You fall to the level of your systems.”

In physics, the second law of thermodynamics states that systems naturally move toward disorder without sustained energy input. In retirement planning, the same principle applies: Without consistent, structured effort, your finances trend toward chaos, not stability.

Why Goals Aren’t Enough

Everyone has retirement goals. Few have retirement systems.

A goal might sound like:

• “I want to retire at 60.”

• “I want to have $1 million saved.”

• “I want to travel the world.”

But without mechanisms in place—a savings plan, a withdrawal strategy, proper insurance, a tax-efficient portfolio—those goals are nothing more than hopeful daydreams.

The problem with goals is that they are outcome-focused. Systems, on the other hand, are process-focused. Retirement is not a singular event; it’s a 20- to 30-year phase of life that demands structure, adaptability, and foresight.

Systems: The Antidote to Entropy

To combat the financial entropy of retirement, you need durable systems. These are repeatable processes and strategies that work even when your motivation doesn’t. Some examples:

• Automated savings: A system where a set percentage of income is funneled into retirement accounts monthly—without relying on willpower.

• Regular portfolio rebalancing: Ensures your investments remain aligned with your risk tolerance, regardless of market euphoria or panic.

• Withdrawal rules: Strategies like the 4% rule or bucket approaches help maintain spending discipline and preserve assets across decades.

• Contingency planning: Systems for dealing with unexpected expenses—long-term care, market downturns, or health issues—before they happen.

The Real Secret to Financial Independence

We often romanticize the freedom that comes with retirement. But freedom isn’t the absence of structure; it’s the reward of well-designed systems. The couples who travel the world in their seventies aren’t luckier than you. They’re better systematized. They made automated contributions, reviewed their plans annually, diversified their income sources, and stayed disciplined over decades.

They didn’t just set a goal—they built a machine.

How to Apply the Second Law

1. Audit Your Current Systems
   Are your savings, investments, and withdrawal strategies operating on autopilot—or are they reliant on your ongoing attention?

2. Shift from Goals to Habits
   Instead of saying, “I want $1 million,” say, “I will invest 15% of every paycheck.” Let the habit drive the outcome.

3. Embrace Redundancy and Resilience
   Systems should account for chaos. Diversify income sources, include buffers in budgets, and plan for the unexpected.

4. Measure and Iterate
   Systems are not static. They evolve. Regularly review your financial plan and adjust for inflation, taxes, longevity, and life changes.

Final Thoughts

The second law of thermodynamics tells us that without intervention, things tend to fall apart. In retirement, the same is true. Dreams degrade in the absence of discipline.

So, don’t just dream of a fulfilling retirement. Engineer it. Build the systems that will carry you forward when motivation fails and markets fluctuate. Because ultimately, you don’t retire on goals—you retire on systems.