Record Number of Americans Forced to Tap Retirement Savings in 2025
Millions of American workers were compelled to access their retirement savings last year, revealing a concerning trend of financial strain across the nation. According to new data from investment giant Vanguard, a record 6 percent of workers with 401(k) plans administered by the firm made hardship withdrawals in 2025. This marks the highest level ever recorded and represents a sharp increase from the 4.8 percent rate observed in 2024.
Unprecedented Financial Pressure on Retirement Accounts
Hardship withdrawals are considered a last-resort financial decision, permitted only when savers face severe economic pressures such as avoiding eviction or foreclosure, covering urgent medical bills, or dealing with job loss. The 2025 figure is roughly three times the typical pre-pandemic rate, when approximately 2 percent of savers tapped their retirement funds. With an estimated 60 to 70 million Americans holding active 401(k) accounts, this data suggests that as many as 4.2 million individuals made hardship withdrawals last year. To put this into perspective, that number is roughly equivalent to the entire population of the state of Oregon draining part of their pension pots just to get by.
Reasons and Amounts Behind the Withdrawals
Most hardship withdrawals were relatively modest in size. Vanguard reported that the median amount taken out was $1,900. The most common reasons cited by participants included avoiding foreclosure or eviction and paying for urgent medical expenses. This underscores the dire financial circumstances many Americans found themselves in during 2025, where accessing retirement savings became a necessary safety net.
Regulatory Changes and Economic Context
Vanguard noted that the surge in hardship withdrawals may not solely reflect worsening economic conditions. In 2018, Congress eliminated a requirement that plan participants must first take out a loan before being able to make a hardship withdrawal, making the process significantly easier. "Given that it's now easier to request a hardship withdrawal and that automatic enrollment is helping more workers save for retirement, especially lower-income workers, a modest increase isn't surprising," the firm stated in its analysis.
"And for a small subset of workers facing financial stress, hardship withdrawals may serve as a safety net that may not otherwise have been available without plan-implemented automatic solutions," Vanguard continued. Despite the rise in withdrawals, average account balances increased by 13 percent in 2025, driven largely by strong market performance. "While there are some signs of heightened financial stress among certain workers, the broad trends in plan design and participant behavior remain strong," Vanguard added, highlighting that automatic contributions have continued to boost savings and investment outcomes.
Positive Trends in Retirement Savings Amid Volatility
Separate data from Fidelity Investments, which reviewed nearly 25 million accounts, revealed that despite heavy market volatility in 2025—particularly during the spring—the average 401(k) balance still rose by 11 percent to $146,100. This marks the third consecutive year that the average workplace retirement account has posted a double-digit gain. Fidelity attributed this growth not only to market performance but also to steady saving habits among 401(k) participants.
In 2025, the S&P 500 index rose by 16.39 percent, while the Nasdaq jumped over 20 percent. Savers across all age groups ended the year with an average balance of $146,000. For participants who have been saving for at least 15 years, the median balance was significantly higher at $377,000. On the highest end of the spectrum, 665,000 retirement accounts concluded 2025 with over $1 million, up from 537,000 in 2024, indicating that long-term investment strategies are yielding positive results for many.
Market Resilience and Long-Term Outlook
Anyone observing the stock market's reactions to global events might feel uneasy about their investments. However, if 2025 demonstrated anything, it is that sharp daily swings in the market do not necessarily dictate long-term performance. Avoiding foreclosure, eviction, and medical bills remained the primary reasons for hardship withdrawals, with a median withdrawal amount of $1,900. While financial stress is evident for a segment of the population, the overall trajectory of retirement savings continues to show strength, driven by robust market gains and consistent participant contributions.
