Borrowing to Save? The Impact of Automatic Enrollment on Debt

A-Tier
Journal: Journal of Finance
Year: 2022
Volume: 77
Issue: 1
Pages: 403-447

Score contribution per author:

0.804 = (α=2.01 / 5 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Does automatic enrollment into a retirement plan increase financial distress due to increased 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 enrollmentincreases cumulative contributions to the plan by 4.1% of annual salary, but we find little evidence ofincreased financial distress. Automatic enrollment causes no significant change in credit scores, debt balances excluding auto debt and first mortgages, or adverse credit outcomes, with the possible exception of increasedfirst‐mortgage balances in foreclosure.

Technical Details

RePEc Handle
repec:bla:jfinan:v:77:y:2022:i:1:p:403-447
Journal Field
Finance
Author Count
5
Added to Database
2026-01-25