Rising Number of Americans Raiding Retirement Savings for Emergency Expenses

SOURCE thehill.com
A record number of Americans are taking early withdrawals from their 401(k) retirement accounts due to financial hardship, with 4.8% of account holders doing so last year. Possible reasons for the increase include more automatic enrollment in retirement plans and relaxed legislation on hardship withdrawals. While this trend may indicate growing financial distress, there is also positive news of increased average account balances and higher contribution rates.

Key Points

  • Record 4.8% of 401(k) account holders took hardship withdrawals last year.
  • Possible reasons for increase: more automatic enrollment in retirement plans and relaxed legislation on hardship withdrawals.
  • Average account balances increased by 10% in 2024, reaching an all-time high of $148,200.

Pros

  • Participants are showing resilience in maintaining a long-term approach to retirement saving.
  • Average account balances have increased due to a strong stock market and higher contribution rates.

Cons

  • Taking early withdrawals can permanently reduce retirement savings.
  • Hardship withdrawals are typically considered a last resort option for dire situations.