The Effect of Default Retirement Savings on Credit Scores


Examine how the credit scores vary after the first year of participation in the OregonSaves program

There are two approaches to identify the impact of retirement savings, especially savings through the default retirement choices, on personal credit scores.

Specific Aim 1: We plan to exploit exogenous variation in the timing of eligibility to the OregonSaves program to examine workers’ saving inside the OregonSaves program with personal debt they hold. We will use a diff-in-diff strategy to compare the changes in the credit scores for workers eligible for contributions in the first year of the program with changes in credit scores for workers ineligible for contributions until the second year of the program. By comparing the variations in the credit scores before and after the first year of OregonSaves for eligible and non-eligible workers, we seek to shed light on the short-term effect of retirement savings on credit scores. Specific Aim 2: The second goal is to compare credit scores of workers who opted out of OregonSaves and those who participated, to determine whether those in the program take on more personal debt. Specific Aim 3: The third goal is to examine how credit scores change after the contribution rates that workers elected are automatically escalated starting in January 2019.


Mounting evidence has documented that default retirement saving policies significantly increase both retirement savings (Madrian and Shea, 2001) and total savings (Chetty et al. 2009). One key question that remains unanswered is where the increased savings come from. It can be either from reduced consumption or from increased debt. If individuals save more by budgeting their pre-retirement consumption, the default policies effectively promote lifetime individual welfare by smoothing their income over time. If individuals save more through borrowing, it defeats the purpose of the default retirement saving policies that aim to help individuals accumulate savings for retirement. Since tracking consumption is empirically challenging, Beshears et al., (2008) investigated whether participating in the default retirement saving programs increased debt using data from the Thrift Savings Plan (TSP) for the U.S. Army. Although that study was under-powered limiting the statistical significance of conclusions, it raised an interesting question leading us to examine whether retirement savings can increase borrowing in ways that undermine peoples’ credit rating. We have collected a large dataset in collaboration with the first state-sponsored retirement savings program in Oregon, called OregonSaves. Our intent in the present paper is to link these administrative records on participation in the OreganSaves project to peoples’ credit scores. Using the merged records, we seek to examine whether and how credit scores change for participants and nonparticipants in the state-based default retirement savings program.

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Award Dates: 
July 1, 2019 - June 30, 2020