Keywords
401(k) loans, retirement borrowing, loan provisions
Abstract
We document the loan provisions in 401(k) savings plans and how participants use 401(k) loans. Although only about 22% of savings plan participants who are allowed to borrow from their 401(k) have such a loan at any given point in time, almost half had used a 401(k) loan over a longer, seven-year horizon. The probability of having a loan follows a hump-shaped pattern with respect to age, job tenure, account balance, and salary, but conditional on having a loan, loan size as a fraction of 401(k) balances declines with respect to these variables. Participants are less likely to use loans in plans that charge a higher interest rate, and loans are smaller when plans allow fewer simultaneously outstanding loans, impose a shorter maximum possible loan duration, or charge a lower interest rate.
Original Publication Citation
“The Availability and Utilization of 401(k) Loans.” 2012. In David A. Wise, editor, Investigations in the Economics of Aging, University of Chicago Press, pp. 145-72 (with John Beshears, James J. Choi and David Laibson). http://www.nber.org/papers/w17118
BYU ScholarsArchive Citation
Beshears, John; Choi, James J.; Laibson, David; and Madrian, Brigitte C., "The Availability and Utilization of 401(k) Loans" (2012). Faculty Publications. 9045.
https://scholarsarchive.byu.edu/facpub/9045
Document Type
Peer-Reviewed Article
Publication Date
2012
Publisher
University of Chicago Press
Language
English
College
Marriott School of Business
Department
Finance
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