Wagner Seminar Series ― Brigitte Madrian
Aetna Professor of Public Policy and Corporate Management, John F. Kennedy School of Government, Harvard University
https://scholar.harvard.edu/bmadrian/home
Borrowing to Save? The Impact of Automatic Enrollment on Debt
Abstract: How much of the retirement savings induced by automatic enrollment is offset by increased borrowing outside the retirement savings plan? We study a natural experiment created when the U.S. Army began automatically enrolling its newly hired civilian employees into the Thrift Savings Plan at a default contribution rate of 3% of income. We find that four years after hire, automatic enrollment causes no statistically significant change in debt excluding auto loans and first mortgages (point estimate = 0.3% of income, 95% confidence interval = [-1.7%, 2.3%]). Automatic enrollment does increase auto loan and first mortgage balances, but these liabilities have muted effects on net worth because they are used to acquire an asset.