401(k) Hardship Withdrawals Just Hit an All-Time High (2026)
6.0% of 401(k) participants took a hardship withdrawal in 2025 — triple the pre-pandemic rate of 2.0%. Six consecutive annual increases, no sign of reversal. Retirement accounts are becoming emergency checking accounts. Vanguard How America Saves data, updated annually.
How Many People Are Taking 401(k) Hardship Withdrawals?
6.0% of 401(k) plan participants took a hardship withdrawal in 2025, according to the Vanguard How America Saves report. That is approximately 1 in 17 workers with a retirement account raiding it to cover current expenses. Not retirement. Rent. Medical bills. The threat of eviction.
Here is what makes that number worth sitting with. The rate was 2.0% in 2019. It has risen every single year since. Not a blip. Not a pandemic artifact. A six-year straight line that kept climbing through a recovery, through a tight labor market, through an economy that the headline numbers kept calling strong.
The acceleration intensified after the SECURE 2.0 Act made self-certified withdrawals of up to $1,000 available without penalty starting in 2024. But the trend predates the policy change. It reflects a structural shift in how American households use retirement savings. The full trajectory is analyzed in "Americans Are Eating Their Retirement". The American Distress Index weights the Safety Net & Buffer domain at 20.0%. Savings exhaustion is historical context for debt defaults that follow.
Key Statistics at a Glance
The American Distress Index currently reads 44.6 (Typical). On average, its inputs sit higher than in 45% of their own quarterly histories since 2005. Hardship withdrawals are context for the ADI's Safety Net & Buffer domain, whose direct input is the savings rate. When workers raid retirement to cover today's bills, it signals that other buffers (savings, credit headroom) have already been exhausted — a pattern of financial distress.
How Fast Are Hardship Withdrawals Rising?
The thing that stands out in this data is the acceleration. The trajectory has been unbroken: from 2.0% in 2019 to 6.0% in 2025, with no year showing a decline. The rate added 1.2 percentage points in the most recent year alone. Compare that to 0.1 pp in the first year of the trend. The curve is steepening, not flattening.
2019: 2.0% | 2020: 2.1% | 2022: 2.8% | 2023: 3.6% | 2024: 4.8% | 2025: 6.0%
401(k) Hardship Withdrawal Rate (%)
Source: Vanguard How America Saves, annual. Covers ~5 million participants in Vanguard-administered defined contribution plans.
Full data: The Cannibalization Rate indicator page
Did SECURE 2.0 Cause the Increase?
This is the question that gets asked most, and the answer tells you more about the problem than the policy does.
The SECURE 2.0 Act (effective January 2024) introduced penalty-free "emergency" withdrawals of up to $1,000 per year from retirement accounts, with self-certification. No documentation of hardship required. This almost certainly contributed to the acceleration from 4.8% to 6.0% between 2024 and 2025.
But SECURE 2.0 does not explain the trend. The hardship rate had already more than doubled (2.0% to 4.8%) before the policy took effect. The legislation made it easier to access retirement savings. The underlying demand was already there — driven by cost pressure (grocery prices up 32% since 2020, auto insurance and healthcare inflating well above headline CPI), stagnant real wages, and depleted emergency buffers. The cannibalization rate thesis argues this is a liquidity crisis hiding inside retirement data. Households are consuming their future because every other buffer has already been exhausted.
The Policy Paradox
SECURE 2.0 was designed to help workers in emergencies. But by reducing friction on hardship withdrawals, it may accelerate the depletion of the very savings that protect households from future financial shocks. The ADI's Safety Net & Buffer domain captures this dynamic: easier access to buffers can worsen the buffer depletion signal, even as it provides short-term relief.
What Do Hardship Withdrawals Tell Us About Savings?
Here is what we keep coming back to. Hardship withdrawals do not exist in isolation. They are one of several indicators showing that American households are drawing down financial reserves simultaneously. The convergence is the signal. Four different sources, four different methodologies, all pointing the same direction:
- Personal savings rate: 2.6% — down from a 7.3% 2019 average (BEA via FRED); sustained well below pre-pandemic levels through the post-2022 cycle
- The $400 Test: 37% can't cover an emergency — stuck at this level for 3 consecutive years despite low unemployment (Federal Reserve SHED survey)
- Hardship withdrawals: 6.0% — triple the pre-pandemic rate, sixth consecutive annual increase (Vanguard How America Saves)
- BNPL adoption is rising while invisible to credit reports — Buy Now Pay Later debt does not appear in NY Fed Household Debt Reports, masking household leverage in aggregate measures (see Phantom Debt)
When multiple buffer indicators worsen simultaneously, it is not a coincidence — it's a signal. The ADI's Safety Net & Buffer domain (20.0% weight) is designed to capture exactly this convergence. The K-shaped distress pattern means lower-income households are burning through these buffers fastest. The last time multiple buffer indicators worsened together was 2005–2007, approximately 9 quarters before debt stress indicators peaked during the financial crisis.
Hardship Withdrawal Rate: Complete Data
| Year | Hardship Withdrawal Rate | Year-Over-Year Change | Cumulative Change Since 2019 |
|---|---|---|---|
| 2019 | 2.0% | — | 0.0 pp (0%) |
| 2020 | 1.7% | -0.3 pp | -0.3 pp (-15%) |
| 2021 | 2.1% | +0.4 pp | 0.1 pp (5%) |
| 2022 | 2.8% | +0.7 pp | 0.8 pp (40%) |
| 2023 | 3.6% | +0.8 pp | 1.6 pp (80%) |
| 2024 | 4.8% | +1.2 pp | 2.8 pp (140%) |
| 2025 | 6.0% | +1.2 pp | 4.0 pp (200%) |
Source: Vanguard How America Saves, annual report. Covers defined contribution plans administered by Vanguard (~5 million participants). "Hardship withdrawal" includes IRS-defined hardship distributions and, from 2024, SECURE 2.0 emergency withdrawals up to $1,000.
Frequently Asked Questions
What is a 401(k) hardship withdrawal?
A hardship withdrawal is an early distribution from a 401(k) retirement plan taken to cover an "immediate and heavy financial need" — typically medical expenses, preventing eviction, funeral costs, or certain home repairs. Unlike a loan, the money is not repaid. Before SECURE 2.0 (2024), these withdrawals carried a 10% early withdrawal penalty plus income taxes. SECURE 2.0 created a new category of penalty-free withdrawals up to $1,000/year.
How many people took hardship withdrawals in 2025?
6.0% of 401(k) participants took a hardship withdrawal in 2025 — approximately 1 in 17 workers with a retirement account (Vanguard, How America Saves 2026). The rate is more than triple the 2.0% pre-pandemic baseline.
Is the hardship withdrawal rate at a record high?
Yes. The 6.0% rate in 2025 is the highest in the Vanguard How America Saves dataset. Each year since 2019 has set a new record — there has been no year-over-year decline in the series.
What does the Vanguard How America Saves report cover?
The Vanguard How America Saves report is an annual analysis of approximately 5 million participants in Vanguard-administered defined contribution retirement plans. It is one of the largest datasets on American retirement behavior. The report covers contribution rates, asset allocation, loans, hardship withdrawals, and retirement readiness metrics.
How do hardship withdrawals connect to household financial distress?
Hardship withdrawals signal that a household's other financial buffers — savings accounts, credit headroom, emergency funds — have been exhausted. Raiding retirement is typically a last resort. If you've reached this point, our guides on understanding bankruptcy options and dealing with debt collectors cover the protections available. The American Distress Index tracks this through its Safety Net & Buffer domain, which historically leads debt delinquency increases by 9 quarters.
Data Sources and Methodology
Vanguard How America Saves
Annual report covering ~5 million participants in Vanguard-administered defined contribution plans. The hardship withdrawal rate is the percentage of active participants who took at least one hardship distribution during the plan year. Published annually, typically in June.
Federal Reserve SHED Survey
The Survey of Household Economics and Decisionmaking (SHED) is an annual survey of ~12,000 adults measuring financial well-being, emergency preparedness, and economic vulnerability. The $400 emergency expense question is the most widely cited finding.
BEA Personal Savings Rate (PSAVERT)
Monthly measure of personal saving as a percentage of disposable personal income. Published by the Bureau of Economic Analysis and available via FRED. The savings rate is a core input to the ADI's Safety Net & Buffer domain.