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Record Number of Americans Tapping 401(k)s for Emergencies, New Report Shows
A growing number of Americans are dipping into their retirement savings to cover unexpected expenses, according to new data from financial services giant Vanguard. In 2025, a record 6% of individuals enrolled in Vanguard 401(k) plans made “hardship withdrawals,” an increase from 5% the previous year.
This upward trend, highlighted in Vanguard’s 2026 report on American savings habits, points to the significant financial strain many households face when confronted with unforeseen bills. The IRS permits hardship withdrawals for a limited set of critical financial issues, including medical care costs or payments to prevent eviction or foreclosure.
Jeff Clark, head of defined contribution research at Vanguard and author of the savings report, emphasized to CBS News the critical need for emergency savings, noting that retirement funds are increasingly acting as a financial safety net when other resources are depleted.
“With more sponsors auto-enrolling workers, people saving at higher rates, they’re building meaningful balances, and so they have retirement assets available if a financial shock occurs,” Clark explained. “It’s inadvertently providing a financial safety net because if they hadn’t been auto-enrolled, they might not have had those assets to tap into for an emergency.”
Workers are seeing larger 401(k) balances due to strong stock market performance over the past few years and improved plan designs that make saving easier. Features like auto-enrollment helped 45% of plan participants boost their savings rates last year, Vanguard reported. By the end of 2025, the average account balance reached $168,000, a 13% increase from the end of 2024, largely fueled by a robust stock market.
Congress has also made it simpler for workers to access these funds in emergencies. A 2022 law, for instance, allows penalty-free withdrawals of up to $1,000 once every three years and permits withdrawals for victims of domestic abuse or those affected by federally declared disasters.
In 2025, the median hardship withdrawal was $1,900. The primary reasons individuals accessed their 401(k)s were:
- Avoiding foreclosure or eviction: 36%
- Medical expenses: 31%
- Tuition: 13%
- Primary residence repairs: 11%
- Primary residence purchase: 5%
These withdrawals also highlight a broader concern: many Americans are underprepared for retirement. A 2026 report from the National Institute on Retirement Security revealed that the median working-age American has only saved $1,000 for their retirement years. This figure includes those with and without access to employer-sponsored retirement plans.
Further underscoring financial pressures, an AARP report found that approximately 7% of retirees are returning to the workforce after retirement, citing ongoing financial needs.