401(k) LOANS AND HOUSEHOLD BALANCE SHEETS
AbstractWe show in a simple model that households will choose 401(k) loans over other consumer loans if the opportunity cost of 401(k) loans — i.e., the foregone asset returns — is less than the cost of other loans, and that few households would carry high-cost consumer debt without first utilizing 401(k) loans. Using data from the Survey of Consumer Finances, however, we find that households typically turn to 401(k) loans only after utilizing more expensive credit. About half of our sample households could benefit from shifting debt to 401(k) loans, generating average savings of about $200 to $275 per year, or 10 to 15 percent of interest costs.
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Bibliographic InfoArticle provided by National Tax Association in its journal National Tax Journal.
Volume (Year): 63 (2010)
Issue (Month): 3 (September)
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- Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2011.
"The Availability and Utilization of 401(k) Loans,"
Working Paper Series
rwp11-023, Harvard University, John F. Kennedy School of Government.
- Choi, James J & Beshears, John & Laibson, David I. & Madrian, Brigitte, 2011. "The Availability and Utilization of 401(k) Loans," Scholarly Articles 5027953, Harvard Kennedy School of Government.
- John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2011. "The Availability and Utilization of 401(k) Loans," NBER Working Papers 17118, National Bureau of Economic Research, Inc.
- Geng Li, 2012. "Gamblers as personal finance activists," Finance and Economics Discussion Series 2012-18, Board of Governors of the Federal Reserve System (U.S.).
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