More Americans than usual are tapping into their retirement accounts for emergency funds, a trend that’s drawing the attention of Empower, the country’s second-largest retirement plan provider by number of participants.
Hardship withdrawals from 401(k)s are running about 15% to 20% above the historical norm
4/25/2025
Hardship withdrawals from 401(k) plans are running about 15% to 20% above the historical average, Empower CEO Ed Murphy said Monday during a Bloomberg TV interview. These withdrawals allow Americans to pull money from their retirement savings to cover urgent and significant expenses, such as medical bills or housing debts. However, such withdrawals are subject to taxes and, for individuals under 59½, can trigger a 10% penalty.
“There’s a corollary between what you’re seeing in the U.S. economy with deferred payments on auto loans and mortgages,” said Murphy, whose company manages 88,000 retirement plans for 19 million people. “That’s something we monitor carefully.”
A separate report from Vanguard Group earlier this year also found hardship withdrawals on the rise, with a record 4.8% of plan participants initiating a withdrawal, up from 3.6% in 2023.
Experts note that part of the increase can be attributed to newer rules that make it easier to access retirement funds, along with the broader adoption of automatic enrollment into 401(k) plans, which has expanded the pool of savers.
However, the trend also comes amid a backdrop of rising consumer prices on everything from cars and groceries to rent and everyday essentials. If the tariffs announced by U.S. President Donald Trump spark a recession or exacerbate price pressures — as a growing number of economists and analysts warn — even more Americans may find themselves turning to their retirement savings.
A March report from the Transamerica Institute’s retirement studies division showed that about one in three savers have taken a loan, early withdrawal, or hardship withdrawal from their retirement accounts, underscoring that financial strain is nothing new for many. In fact, about 55% of actively working respondents said they have not yet financially recovered from the pandemic and its aftermath.
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