More Americans are using 401(k) retirement accounts as personal ATMs.
Last year, 6% of Vanguard retirement savers took hardship withdrawals from their 401(k) accounts, an all-time high. Hardship distribution rates have risen dramatically in recent years, up from 1.7% in 2020.
Hardship withdrawals have spiked among Fidelity retirement savers, as well.
On the whole, American companies and their employees are doing a better job of saving for retirement. For example, 61% of Vanguard retirement plans now automatically enroll new workers in 401(k)s, up from 54% in 2020. Auto-enrollment tends to raise saving rates.
The rise in hardship withdrawals suggests, however, that some retirement savers are financially fragile: Living paycheck to paycheck, and unable to amass enough savings outside their retirement accounts to cover an emergency.
