Young, Jean A

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  • Publication
    Borrowing from the Future: 401(k) Plan Loans and Loan Defaults
    (2015-04-01) Lu, Timothy Jun; Mitchell, Olivia S; Utkus, Stephen P; Young, Jean A
    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.