The Availability and Utilization of 401(k) Loans
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.
|Date of creation:||Jun 2011|
|Date of revision:|
|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|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- 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.
- Timothy Jun Lu & Olivia S. Mitchell, 2010. "Borrowing from Yourself: The Determinants of 401(k) Loan Patterns," Working Papers wp221, University of Michigan, Michigan Retirement Research Center.
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