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The Availability and Utilization of 401(k) Loans

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  • John Beshears
  • James J. Choi
  • David Laibson
  • Brigitte C. Madrian

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17118.

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Date of creation: Jun 2011
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Publication status: published as The Availability and Utilization of 401(k) Loans , John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian. in Investigations in the Economics of Aging , Wise. 2012
Handle: RePEc:nbr:nberwo:17118

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  1. Li, Geng & Smith, Paul A., 2010. "401(k) LOANS AND HOUSEHOLD BALANCE SHEETS," National Tax Journal, National Tax Association, vol. 63(3), pages 479-508, September.
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