Borrowing from the Future: 401(k) Plan Loans and Loan Defaults

Timothy (Jun) Lu, Olivia S. Mitchell, Stephen P. Utkus, Jean A. Young

NBER Working Paper No. 21102
Issued in April 2015
NBER Program(s):Aging, Labor Studies, Public Economics

Tax-qualified retirement plans seek to promote saving for retirement, yet most employers permit pre- retirement access by letting 401(k) participants borrow plan assets. This paper examines who borrows and why, and who defaults on their loans. Our administrative dataset tracks several hundred plans over 5 years, showing that 20% borrow at any given time, and almost 40% do at some point over five years. Employer policies influence borrowing behavior, in that workers are more likely to borrow and borrow more in aggregate, when a plan permits multiple loans. We estimate loan default “leakage” at $6 billion annually, more than prior studies.

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A non-technical summary of this paper is available in the 2015 number 2 issue of the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21102

Published: Timothy (Jun) Lu & Olivia S. Mitchell & Stephen P. Utkus & Jean A. Young, 2017. "Borrowing From the Future? 401(K) Plan Loans and Loan Defaults," National Tax Journal, National Tax Association, vol. 70(1), pages 77-110, March. citation courtesy of

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