A record number of Americans are withdrawing money from their 401(k)s in so-called “hardship distributions.” CBS‘s Megan Cerullo reports:
A record share of Americans are tapping their retirement savings accounts to cover emergency expenses, according to new data from financial services firm Vanguard.
In 2025, 6% of people enrolled in Vanguard 401(k) plans made so-called hardship withdrawals from their accounts, up from 5% in 2024, according to the company’s 2026 report on Americans’ savings habits.
This is not a good sign. Americans pulling from their retirement savings is a signal that all is not right. But there may be some explanation as to why the numbers are increasing. Anne Tergesen reports in The Wall Street Journal:
In recent years, Congress has also expanded the list of allowable reasons to take a hardship withdrawal. Under a 2022 law, it gave employers flexibility to permit them for victims of domestic abuse and federally declared disasters. That law also lets people take out up to $1,000 penalty-free for an emergency once every three years. Those who replace what they take out can tap their accounts again the next year.
Another factor behind the rise is the spread of automatic enrollment. As it has moved more workers into 401(k) accounts, it is giving more people savings to draw on. (Workers can opt out of automatic enrollment, but many fail to take that step.)
Action Line: In any case, pulling money from your retirement savings destroys your best vehicle for compounding with tax advantages. Only do so as a last resort. When you want to talk about an IRA Rollover for your 401(k), email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
