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Russian (RU) Vawn Himmelsbach
Mon, Apr 28, 2025, 6:03 AM 5 min read
More Americans are tapping into their 401(k) to make ends meet — treating it more like an emergency fund than a retirement savings plan.
Hardship withdrawals are running 15% to 20% above the historical norm, Empower CEO Ed Murphy told Bloomberg TV. Empower is the second-largest retirement plan (by number of participants) in the U.S.
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While new rules make it easier to withdraw funds, some people may be turning to their retirement savings as prices on consumer goods — from groceries to cars — tick upward.
“There is a corollary to what you are seeing in the U.S. economy with deferred payments on auto loans and mortgages,” Murphy told Bloomberg TV. “So that’s something we monitor carefully.”
Hardship withdrawal rules for 401(k)s changed in 2024, in accordance with the Securing a Strong Retirement Act of 2022 (SECURE 2.0).
A hardship withdrawal allows you to withdraw money from your 401(k) to cover an “immediate and heavy financial need,” according to the Internal Revenue Service (IRS).
Some people may be making this decision based on financial hardship, such as housing or medical debt.
A new report from Vanguard noted similar findings to Empower, with 4.8% of 401(k) participants initiating a hardship withdrawal in 2024 — up from 3.6% in 2023.
While there are a few “signals of a possible uptick in financial stress,” the report says that for some workers hardship withdrawals “may serve as a safety net that otherwise may not have been available without plan-implemented automatic solutions.”
Another report, this one from the Transamerica Center for Retirement Studies, found that more than eight in 10 (83%) of employed workers are saving for retirement.
However, 37% say they’ve already tapped into their retirement accounts, “including 31% who have taken a loan and 21% who have taken an early and/or hardship withdrawal,” according to the report.
“Today’s workers are stuck between a rock and a hard place,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS, in a release. “They are traversing disruptions in the economy, a tenuous employment market, and the high cost of everyday living — while being expected to self-fund a greater portion of their retirement income compared with prior generations.”
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