NEW YORK — A growing number of Americans are tapping their retirement savings to cover financial emergencies, with a record share of workers taking hardship withdrawals from their 401(k) plans last year, according to a new report from the Vanguard Group.
About 6% of workers participating in 401(k) plans administered by Vanguard took a hardship withdrawal in 2025, up from 4.8% in 2024 and well above the pre-pandemic average of roughly 2%, the firm said.
The increase highlights a split picture of U.S. household finances, Vanguard said. While many workers are benefiting from rising savings and strong investment markets, others are facing financial strain that is prompting them to dip into retirement accounts.
Emergency Withdrawals Rise
The rise in hardship withdrawals marks the sixth consecutive annual increase since 2018, when Congress loosened rules governing such distributions by eliminating the requirement that participants first take a loan from their 401(k) before accessing funds for hardship reasons, Vanguard said.
The most common reasons cited for hardship withdrawals in 2025 were avoiding foreclosure or eviction and covering medical expenses. The median withdrawal totaled about $1,900, according to Vanguard.
Vanguard administers 401(k)-type retirement accounts for nearly 5 million workers and analyzed data from about 1,300 employer-sponsored plans.
Among those plans, 61% automatically enrolled new employees in 2025, up from 34% in 2013, the company said.
Workers who take hardship withdrawals from traditional 401(k) accounts generally must pay income taxes on the funds and often face an additional 10% penalty if they are younger than 59½.
Savings Still Rising
Despite the uptick in emergency withdrawals, other indicators point to improving retirement savings among many workers, according to Vanguard.
Supported by strong domestic and international stock markets, the average 401(k) balance rose 13% in 2025 to a record $167,970, Vanguard said.
Participation in automatic savings features also continued to climb. A record 45% of workers increased their savings rate in 2025, largely through automatic escalation programs — matching the share that boosted savings in 2024.
In addition, nearly one-third of plans with automatic enrollment in 2025 started employees at an initial contribution rate of 6%, Vanguard reported.
