The economy is doing great. Just fantastic. Everything is just peachy. And yet, in what must be a completely unrelated coincidence, a record number of Americans are cracking open their retirement savings accounts early and pulling money out.
Clearly this has nothing to do with rent, medical bills, or the general cost of existing in 2026. Workers must simply be curious about what their retirement savings look like in cash form.
New data from Vanguard shows that a record number of workers tapped into their retirement accounts last year to cover financial emergencies. According to Vanguard, 6% of workers in the company’s 401(k) plans took a hardship withdrawal in 2025, the highest level ever recorded. That’s up from 4.8% in 2024 and far above the roughly 2% average before the pandemic.
Why People Are Tapping Their Retirement Savings
Hardship withdrawals have been climbing for years, and part of the reason is structural. Congress loosened the rules in 2018, eliminating a requirement that workers first take a 401(k) loan before qualifying for a hardship withdrawal, making it easier to access funds directly. Later changes under the SECURE 2.0 Act in 2022 expanded the list of eligible situations — such as domestic abuse or federally declared disasters — and allowed workers to withdraw up to $1,000 penalty-free for emergencies once every three years.
At the same time, financial pressures continue to push some workers toward those accounts. According to Vanguard, the most common reasons for hardship withdrawals last year were avoiding eviction or foreclosure and covering medical expenses, with the median withdrawal at $1,900 — an amount that can plug a short-term gap but rarely solves the underlying problem.
Another big driver is the spread of automatic enrollment, which has pushed more workers into 401(k) plans and left more people with balances they can tap when cash runs short. Workers can opt out, but many don’t. Among the roughly 1,300 employer plans that use Vanguard’s 401(k) administration services, 61% automatically enrolled new hires in 2025, up from 34% in 2013.
Even when the withdrawal is allowed, it’s not cheap. People taking hardship withdrawals from traditional 401(k) accounts generally owe income tax, and they often face an additional 10% penalty if they’re younger than 59 and a half.
‘Short Term Survival Over Long Term Gains’
For workers trying to survive in this economy, the data simply reflects what they’re already experiencing, with many people saying they’ve done the same and others emphatically supporting the choice.
“I’ve had to do it twice in the past year and am going on a third time now. Not to mention I haven’t been able to invest in a couple of years now. It’s rough out here,” said one user on Reddit.
“I dont think people are pulling from their 401k because they want to,” said another.
Another shared, “They’re choosing short term survival over long term gains. Easy for people to judge when they’re not making those kinds of hard calls on a daily basis.”
Have you had to make this kind of difficult decision before? Share your experience in the comments.
