U.S. 401(k) Hardship Withdrawal Rate Hits Record High

Multiple English media outlets cite the latest data from Vanguard, indicating that by 2025, approximately 6% of 401(k) plan participants will take "hardship withdrawals" from their accounts, marking a record high, up from about 4.8% in 2024 and significantly higher than the pre-pandemic level of around 2%.

The report states that these early withdrawals are primarily used to avoid foreclosure or eviction, pay medical expenses, and cover tuition and other urgent costs, with the median withdrawal amount in 2025 estimated at about $1,900. This reflects an increasing short-term financial pressure and cash flow issues among U.S. residents, even as nominal account balances rise with the market.

In terms of fund flows and asset allocation, more U.S. residents are being forced to use their 401(k) as a short-term safety net rather than a long-term retirement asset pool, incurring income taxes and a 10% early withdrawal penalty, effectively overdrawing future retirement savings at a high cost. This undermines the long-term accumulation function of the pension system and suggests that low- to middle-income groups may continue to rely more on high-interest credit and informal borrowing channels amid rising interest rates, rents, and medical costs.

Source: Public Information