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Key Findings Details

Borrowing from Yourself: The Determinants of 401(k) Loan Patterns
Timothy Jun Lu and Olivia S. Mitchell
WP 2010-221

  • People not only use 401(k) plans to save for retirement, but also draw on plan loans to make ends meet.
  • People who are liquidity-constrained are more likely to take plan loans, while the better-off take larger loans when they do borrow.
  • When a plan permits participants to take more loans, this boosts the probability of plan borrowing and loan size, whereas loan interest rates have only a small impact on participant behavior.
  • Middle-aged people are more likely to take larger loans than those who are younger or older.