Why Workers Are Draining Their 401(k)s at Record Rates

"While average 401(k) balances hit a record $167,970 in 2025, hardship withdrawals also reached an all-time high of 6%-triple the pre-pandemic rate. The primary drivers are housing and healthcare costs. Workers are using retirement savings to avoid foreclosure and eviction, and to pay medical expenses, with a median withdrawal of $1,900."

"This marks the sixth consecutive year of increases since Congress made it easier to access 401(k) funds in 2018 by eliminating the loan requirement. The trend reflects America's divergent economy: most workers are building wealth through automatic enrollment and rising markets, but others face financial emergencies severe enough to sacrifice their retirement security."

Vanguard data reveals a paradox in the American economy: while average 401(k) balances reached a record $167,970 in 2025, hardship withdrawals simultaneously hit an all-time high of 6%, triple the pre-pandemic rate. Housing and healthcare costs are the primary drivers, with workers withdrawing a median of $1,900 to avoid foreclosure, eviction, and pay medical expenses. This marks the sixth consecutive year of increases since 2018, when Congress eliminated the loan requirement for 401(k) access. The trend reflects economic divergence: most workers build wealth through automatic enrollment and rising markets, while others face severe financial emergencies forcing them to sacrifice retirement security.

Read at Entrepreneur