The Big Money Show breaks new IRS limits on 401(k)s and IRAs, giving savers more room to invest for retirement.
A record number of Americans entered their own 401(k) retirement savings with the withdrawal of the crisis last year due to financial challenges, the new data shows.
The Vanguard Group reported that 6% of participants in company-administered 401(k) plans have taken. withdrawal of difficulty in 2025, from 4.8% in 2024.
That number is also higher than the pre-pandemic average of about 2% of 401(k) plan participants annually making hardship withdrawals from their retirement plans, Vanguard said.
The report noted that hardship withdrawals may be a sign of financial stress as workers use their 401(k) as a safety net to help cover unexpected or emergency expenses.
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IRA withdrawals are trending higher in 2025 as some savers experience financial stress, Vanguard has found. (Stock)
Vanguard added that the process of asking for the withdrawal of hardship since 401(k) plans have become easier to implement, which may explain the increase in withdrawal activity.
“Given that it is now easier to request a hardship waiver and that automatic enrollment is helping many workers save for retirement, especially low-wage workers, the small increase is not surprising,” the company wrote.
“And for a small group of employees who are facing financial stress, the withdrawal of hardship can be a security that may not be available without the automation solutions implemented in the system,” Vanguard continued.
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A Vanguard report found that foreclosures, evictions and medical expenses were the top reasons for 401(k) withdrawals. (Mike Mergen/Bloomberg via Getty Images)
To avoid foreclosure, eviction and medical expenses were the top reasons 401(k) participants made hardship withdrawals, while the average withdrawal size was $1,900, according to Vanguard.
The report found that participants were focused on financial goals by 2025 and saw average account balances increase by 13% due to market efficiency. Vanguard noted that 45% of 401(k) participants increased their deferrals on their own or with automatic annual increases.
“While there are signs of increasing financial stress among some employees, the broader trend in program design and participant behavior remains strong,” Vanguard said, noting that automatic giving has increased savings and investment.
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Congress changed the law to make it easier for Americans to withdraw hardships from 401(k) plans in 2018. (Al Drago/Getty Images)
The use of 401(k) loan – another form of withdrawal – was low and remained below pre-pandemic levels.
Congress changed the process for taking 401(k) hardship withdrawals in 2018, making it easier to do so by removing the requirement that a plan participant take out a loan first before being allowed to withdraw.
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Vanguard found that hardship withdrawals increased for six consecutive years after the change.
