46% of Gen Z workers have raided their retirement accounts — but is it ever ok to steal from your future self?

Core Insights - A significant 46% of Gen Z has withdrawn funds from their retirement accounts, primarily to pay off debt, which hampers their ability to rebuild retirement savings [1] - Approximately one in three workers across all generations plan to access their retirement funds in the coming year, mainly for emergencies or daily expenses [1] Financial Reality - The average personal savings rate in the U.S. is around 4%, indicating a historically low level of savings and financial strain among Americans [2] - A survey revealed that 37% of Americans cannot afford an emergency expense exceeding $400, and 25% would resort to credit cards for a $1,000 emergency [2] Consequences of Early Withdrawals - Early withdrawals from retirement accounts can lead to long-term financial repercussions, including penalties and taxes, particularly for 401(k) withdrawals before age 59½, which incur a 10% penalty [4] - The potential growth lost from early withdrawals is substantial; for instance, withdrawing $10,000 at age 25 could result in a loss of approximately $150,000 by retirement age if invested at a 7% annual return [5] Future Implications - Reduced retirement savings may necessitate longer working years or a lower standard of living in retirement, with 39% of working-age households projected to struggle maintaining their current lifestyle in retirement [6] - Using retirement funds to address current debt may provide short-term relief but ultimately compromises future financial security [6]