NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Availability and Utilization of 401(k) Loans

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

NBER Working Paper No. 17118
Issued in June 2011
NBER Program(s):   AG

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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Document Object Identifier (DOI): 10.3386/w17118

Published: 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

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