HUNTSVILLE, Ala. (WAFF) – A record 6% of 401(k) participants withdrew funds from their accounts for financial hardships in 2025, according to a 2026 report from Vanguard. The figure represents a steady climb from 2023 to 2024.
Financial expert Marshall Clay from The Welch Group says hardship withdrawals should be used as a last resort, though they are a tool available to those facing financial difficulties.
“We spend so much time encouraging people to accumulate wealth and utilize these tools like 401ks and IRAs to sort of help their long-term financial position,” Clay said. “The reality is, sometimes you confront something in the short term that you need a source of liquidity.”
Understanding hardship withdrawals
Hardship withdrawals are permanent, with no repayment option. Clay said once money is pulled out, it cannot be put back, with a small $1,000 exception…