More Americans tapping into 401(k) retirement for emergency funds 

• More Americans have tapped into their retirement savings for emergency expenditures. Vanguard examined the data of nearly 5 million people enrolled in 401(k) plans.
• In 2024, 4.8% took out a hardship withdrawal — a 1.2 percentage point jump from 2023.
• Financial hardships include eviction, home foreclosure, medical expenses and other factors.

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A report from investment advisor Vanguard found that in 2024, more Americans treated their 401(k) retirement savings like an emergency fund.

According to a preview of Vanguard’s How America Saves 2025 report, hardship withdrawals rose to 4.8% in 2024, up from 3.6% in 2023. Vanguard analyzed the data of nearly 5 million individuals with this type of retirement account.

What challenges do people often face?

The report noted that such withdrawals allow people to access a portion of their retirement savings for financial difficulties such as eviction, home foreclosure or medical expenses. Vanguard called the money a safety net for people facing financial stress.

What are the regulations for withdrawing this money?

Internal Revenue Service (IRS) rules state that a hardship withdrawal is a one-time withdrawal from your 401(k) retirement plan to address an immediate and substantial financial need.

In comparison, before the COVID-19 pandemic, only around 2% of account holders made a hardship withdrawal. The recent increase may indicate rising financial distress.

Additionally, Congress made it easier to request one. A law passed in 2018 eliminated the requirement that workers must first take out a loan before accessing their 401(k).

Employees typically have to wait until they are almost 60 years old to access the funds accumulated in their employer’s program.

Making early withdrawals has its downsides. The IRS imposes a 10% penalty and treats the money as income, making it subject to tax. Hardship withdrawals are often considered a last resort, and the money cannot be paid back.

What other troubling signs exist in personal finance?

It’s not only 401(k) accounts under pressure. The Federal Reserve Bank of New York reported that credit card debt in the U.S. reached $1.2 trillion by the end of 2024.