Hard-up workers are raiding their 401(k) in record numbers — here's why, plus how to avoid it and preserve your savings

Core Insights - Retirement accounts, traditionally viewed as long-term savings tools, are increasingly being used as emergency funds by Americans facing financial difficulties [1][2] Group 1: Hardship Withdrawals - A record 6% of workers in Vanguard's 401(k) plans took hardship withdrawals last year, an increase from 5% the previous year [2] - The most common reasons for early withdrawals include urgent financial issues such as avoiding eviction or foreclosure and covering medical expenses [3] - The median hardship withdrawal amount was approximately $1,900, indicating that many individuals are addressing short-term financial gaps [3] Group 2: Trends and Legislative Changes - Hardship withdrawal rates have been on the rise since 2020, influenced by legislative changes that made withdrawals easier, including the removal of a requirement to take a loan first [4] - Recent legislation has expanded the list of qualifying situations for hardship withdrawals, contributing to the increase [4] Group 3: Increased Participation in Retirement Accounts - More Americans are participating in retirement accounts due to automatic enrollment programs, with 61% of employers using Vanguard's services automatically enrolling new hires in 2025, compared to about one-third in 2013 [5] - This increase in participation means a larger pool of retirement savings is available for workers to tap into during financial crises [5]