Borrowing to Save? The Impact of Automatic Enrollment on Debt

48 Pages Posted: 28 May 2019

See all articles by John Beshears

John Beshears

Harvard University - Business School (HBS); National Bureau of Economic Research (NBER)

James J. Choi

Yale School of Management; National Bureau of Economic Research (NBER)

David Laibson

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Brigitte C. Madrian

Brigham Young University Marriott School of Business; National Bureau of Economic Research (NBER)

Bill Skimmyhorn

Mason School of Business, College of William & Mary; U.S. Army Office of Economic and Manpower Analysis

Date Written: May 2019

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

Beshears, John and Choi, James J. and Laibson, David I. and Madrian, Brigitte C. and Skimmyhorn, William, Borrowing to Save? The Impact of Automatic Enrollment on Debt (May 2019). NBER Working Paper No. w25876. Available at SSRN: https://ssrn.com/abstract=3394657

John Beshears (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
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National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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James J. Choi

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
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National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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David I. Laibson

Harvard University - Department of Economics ( email )

Littauer Center
Room M-14
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617-496-3402 (Phone)
617-495-8570 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Brigitte C. Madrian

Brigham Young University Marriott School of Business ( email )

Provo, UT 84602
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

William Skimmyhorn

Mason School of Business, College of William & Mary ( email )

Williamsburg, VA
United States

HOME PAGE: http://https://mason.wm.edu/faculty/directory/full-time-faculty/skimmyhorn_w.php

U.S. Army Office of Economic and Manpower Analysis ( email )

West Point, NY
United States

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