Economic Challenges - Many Americans are struggling to accumulate sufficient savings and afford emergency expenses as costs for home repairs and hospital stays increase faster than inflation [1] - In 2024, 13% of adults reported being unable to pay a $400 emergency expense, while 37% indicated they would cover it by borrowing money or selling items [5] Retirement Savings Impact - The percentage of employees taking hardship withdrawals from retirement accounts more than doubled from 2% in 2018 to about 5% in 2024 [2][10] - Hardship withdrawals, while not penalized, reduce retirement savings and cannot be repaid, potentially delaying retirement or reducing future funds [4] Rising Costs of Emergencies - Vehicle maintenance and repair costs rose by 7.7% in September 2025 compared to September 2024, significantly outpacing general inflation of 3.0% [7] - The average cost of car repairs reached $838 in early 2025, influenced by supply chain disruptions and tariffs on parts [8] - Hospital stay costs increased by nearly 25% over the past five years, with hospital service costs rising almost twice as fast as general inflation [9][11] Home Repair Expenses - Increased frequency and severity of natural disasters have led to higher spending on home repairs [13] - From July 2024 to July 2025, the cost of home reconstruction, including materials and labor, increased by 4.2% due to rising prices from tariffs [14]

Core Insights - The average American's retirement savings rate in defined contribution plans is at a record high, yet there is an increase in hardship withdrawals from 401(k) plans for emergencies [1] Summary by Sections Hardship Withdrawals - In 2024, 4.8% of plan participants took hardship withdrawals, an increase from 3.6% in 2023 and 2.8% in 2022 [1] - Hardship withdrawals are typically taken for serious financial needs, such as medical emergencies or housing issues, with participants only able to withdraw the necessary amount [3] - Once withdrawn, the funds cannot be replaced, and only new contributions can be made without catch-up provisions [4] Reasons for Withdrawals - The primary reasons for hardship withdrawals include avoiding evictions/foreclosures and covering medical expenses, which account for nearly two-thirds of these distributions [4] - In 2024, 16% of participants withdrew funds for home purchases or repairs, with an increase noted in the second half of the year, likely due to natural disasters [5] - Additionally, 14% of withdrawals were made to cover tuition costs [5] Economic Disparities - The trend of increased hardship withdrawals reflects economic disparities, with higher-income workers experiencing a 3.6% wage growth year-over-year, while lower-income workers saw only a 0.9% increase [6] - Approximately one-third of Americans lack emergency savings, and the median emergency fund is only $500, highlighting the challenges posed by rising living costs [7] - A survey indicated that 58% of respondents feel it is "almost impossible" to build emergency savings due to elevated costs [7] Plan Flexibility - The increase in hardship withdrawals may also be attributed to more plans allowing such withdrawals, with 94% permitting them in 2024 compared to 85% in 2019 [5]