Tuesday, September 16, 2025

Hardship Withdrawals from 401(k)s Surge as Americans Face Financial Pressure

Hardship withdrawals from 401(k) retirement accounts are running 15% to 20% above historical norms as Americans face mounting financial pressure, according to retirement plan provider Empower.

The trend signals growing financial strain among US workers who are increasingly turning to retirement savings to cover immediate expenses, Empower CEO Ed Murphy told Bloomberg in a recent interview.

“There is a corollary to what you are seeing in the US economy with deferred payments on auto loans and mortgages,” said Murphy, whose company administers 88,000 retirement plans for 19 million people.

A Vanguard Group report earlier this year confirmed the upward trend, finding that 4.8% of plan participants initiated hardship withdrawals in 2024, up from 3.6% in 2023.

Experts attribute the rise partly to regulatory changes making withdrawals easier and the widespread adoption of automatic enrollment in 401(k) plans, which has expanded the pool of participants. However, they note the increase also coincides with rising consumer prices for essentials including housing, groceries, and transportation.

Financial analysts warn that Trump’s tariffs could exacerbate the situation if they trigger a recession or increase price pressures, potentially forcing even more Americans to dip into retirement savings.

For those under 59 years and six months, withdrawals typically incur a 10% penalty in addition to being taxed as income, creating long-term consequences for retirement security.


Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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