A CONCERNING TREND IS HAPPENING WITH 401(K)S—WHAT TO KNOW
A record number of Americans are used their 401(k) retirement accounts for financial emergencies last year, a new report found.
According to investment firm Vanguard, six percent of Americans dipped into their retirement accounts for emergency situations last year, which was up from 4.8 percent the year previously.
The group said that while 401(k) accounts generally are doing well, Americans increasingly are encountering the kind of financial difficulties that require them to be raided.
In that divergent economy, Vanguard said, “hardship withdrawals may serve as a safety net that may not otherwise have been available without plan-implemented automatic solution.”
According to Vanguard, the median withdrawal was $1,900, as The Wall Street Journal reported.
Why it Matters
In 2025, retirement savings surged nearly 11 percent year-over-year.
However, the divide can be stark: According to one report, the average American has $995 saved for retirement.
Dipping into a 401(k) used to come with significant financial penalties of up to 10 percent—rules designed to encourage the owner of the account to stay invested and avoid making decisions that could harm them when they get older.
“The increase in hardship withdrawal usage indicates a powerful need for financial wellness and emergency savings resources for workers,” Jeff Clark, head of defined contribution research at Vanguard, told Newsweek in an email.
“Most retirement savers balance multiple short- and long-term financial goals. Vanguard and employers are increasingly seeking ways to support employee financial wellness within and outside of the 401(k) plan.”
What People Are Saying
Commentators on Reddit’s r/politics forum discussed how dire their financials situations were.
“Awfully bold of this article to assume I even have a 401K still,” one person quipped.
“I lost mine during COVID,” another remarked, “Now it’s barely paycheck to paycheck.
“A hospital stay a couple of weeks ago awarded me a bill for $100k since the lack of [Affordable Care Act] subsidies left me without insurance.
“So much winning going on in this country.”
Elsewhere in the thread, “It was such a good decision to make retirement based on the stock market and allow people to make their retirements tougher and tougher by being able to take money out before retirement,” a critic responded sarcastically.
Finally, one individual pointed out: “Buy now pay later [is] increasing.”
“I’m always surprised to see this as an option on food delivery apps,” another replied.
“It seems like if you need to split payments to get a hamburger delivered, you probably shouldn’t be paying to have a hamburger delivered, barring being unable to travel yourself.”
What’s Next
The Internal Revenue Service (IRS) urges caution regarding withdrawals, noting on its website that, “the amount of the hardship distribution will permanently reduce the amount you’ll have in the plan at retirement.
“Remember, a 401(k) plan is designed to help you save money for retirement,” the service warned.
“Consider the consequences before dipping into your retirement savings.”
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2026-03-06T12:28:37Z
