When it comes to retirement savings, not everyone can bask in the good fortune of seeing their accounts balloon when the markets soar. They need money now.
According to the Vanguard Group’s “How America Saves 2026” report, a record 6% of the company’s 5 million employees in 401(k) plans withdrew money from their accounts to pay for financial hardship. This is up from 4.8% in 2024, 3.6% in 2023, and triples the number that did before the disease.
It was the sixth consecutive year that foreclosures increased, according to Vanguard researchers. In addition, 13% of participants had the same amount of debt at the end of 2025 as in 2024.
To be clear, most people don’t treat their retirement accounts like piggy banks. The most common reasons for moving out: to avoid foreclosure or eviction, followed by medical expenses.
Average withdrawal amount: $1,900. This is not a significant amount, but it can have an impact on the financial security of future retirees. If you invest this amount at an annual return of 8.5%, in two decades it can rise to an estimated $9,712.94 without any additional dividends.
Read more: How Much Do You Really Need to Save for Retirement?
But it’s hard to figure out the math when debt collectors come calling.
In addition to reducing retirement savings, 401(k) withdrawals trigger income taxes on any previously untaxed withdrawals and an additional 10% tax if participants are not at least 59 ½, with a few exceptions.
Here is where it gets interesting. Over the past few years, new laws have made it easier for many workers to take hard withdrawals from 401(k) accounts.
The Bipartisan Budget Act of 2018, for example, eliminated the mandatory requirement to use up all available 401(k) loans before taking a hardship withdrawal. The law makes this status optional for employer plans.
Starting in 2024, under the Safeguard 2.0 Act, workers can withdraw up to $1,000 a year from a retirement account for certain emergency needs without a 10% early withdrawal penalty. And if you agree to pay it back within three years, you may not face a tax bill on the money, provided the withdrawal goes to a personal or family emergency.
Socking away money in an employer-provided retirement account is a no-brainer if you don’t need the money to pay bills today. But many low-income workers, especially young workers who live paycheck to paycheck, don’t always have that luxury.
Financial pressures come from all directions, said Jeff Clark, director of defined-grant research at Vanguard. There’s student loan debt, rising health care costs, and mounting credit card debt piling up at double-digit variable interest rates.
