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Borrowing to Save? The Impact of Automatic Enrollment on Debt

Author

Listed:
  • John Beshears
  • James J. Choi
  • David Laibson
  • Brigitte C. Madrian
  • William L. Skimmyhorn

Abstract

Does automatic enrollment into a retirement plan increase borrowing outside the plan? We study a natural experiment created when the U.S. Army began automatically enrolling newly hired civilian employees into the Thrift Savings Plan. Four years after hire, automatic enrollment causes no significant change in credit scores (point estimate 0.001 standard deviations) or debt balances excluding auto loans and first mortgages (point estimate -0.6% of annual salary). We also find no significant increase in auto loan and first mortgage balances in our main regression specification, although the estimated increases in these categories are economically and statistically significant in alternative specifications.

Suggested Citation

  • John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian & William L. Skimmyhorn, 2019. "Borrowing to Save? The Impact of Automatic Enrollment on Debt," NBER Working Papers 25876, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25876
    Note: AG LS PE
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving

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