A growing number of Americans are tapping their retirement savings to manage financial challenges, according to new data from Vanguard Group.

The firm reported that a record share of workers took hardship withdrawals from their 401(k) retirement plans in 2025. The increase suggests that financial pressures are pushing more households to rely on long-term savings to cover urgent expenses.

Although retirement savings are designed for long-term use, hardship withdrawals allow individuals to access funds early when they face certain financial difficulties.

Record Share of Workers Withdrawing Savings

Vanguard found that about 6% of participants in the 401(k) plans it administers made hardship withdrawals in 2025.

That figure rose from 4.8% in 2024 and is significantly higher than the average before the pandemic, when roughly 2% of participants took hardship withdrawals each year.

The data highlights how financial stress has increased for some workers even as overall retirement savings continue to grow.

Hardship withdrawals are typically allowed only in specific situations involving financial emergencies.

Why Workers Are Turning to Retirement Funds

The report identified several common reasons why participants withdrew money from their retirement accounts.

Avoiding foreclosure or eviction was one of the most frequent causes, reflecting ongoing housing affordability challenges in some parts of the country.

Medical expenses also drove many withdrawals as households faced unexpected health costs.

These types of financial emergencies can leave workers with limited options, especially if they lack other savings.

Vanguard said the median hardship withdrawal in 2025 was about $1,900.

Easier Access May Be Driving the Increase

Another factor contributing to the rise in hardship withdrawals may be changes in how retirement plans operate.

Over time, many plans have simplified the process for requesting withdrawals during financial emergencies.

This streamlined process may make it easier for workers facing immediate financial pressure to access their retirement savings.

Vanguard noted that the increase in withdrawals was not entirely unexpected given recent changes in plan design and broader economic conditions.

The expansion of automatic enrollment in retirement plans has also brought more workers into 401(k) systems, including many lower-income employees who may be more vulnerable to financial shocks.

Retirement Savings Still Growing Overall

Despite the increase in hardship withdrawals, the report also found encouraging signs for long-term retirement savings.

Many participants continued contributing to their retirement accounts throughout 2025.

Average account balances rose by about 13% during the year, largely due to strong investment performance in financial markets.

At the same time, nearly half of participants increased their contribution rates either voluntarily or through automatic plan adjustments.

About 45% of workers boosted their savings levels through either personal decisions or automatic annual increases built into their plans.

Automatic Enrollment Strengthening Participation

Automatic features built into many retirement plans appear to be helping more workers stay engaged with long-term saving.

Automatic enrollment ensures that employees begin contributing to retirement accounts soon after joining a workplace plan unless they opt out.

Automatic escalation features gradually increase contribution rates over time, which can help participants build savings without needing to actively adjust their plans.

According to Vanguard, these design features continue to improve participation and investment outcomes for many workers.

Financial Stress Still a Key Concern

Even with positive trends in retirement participation, the rise in 401k hardship withdrawals record activity suggests that some households remain financially vulnerable.

Unexpected costs such as housing issues or medical bills can quickly strain budgets, leading workers to rely on retirement accounts as a financial safety net.

Financial planners often caution that early withdrawals can reduce long-term retirement savings because the funds lose years of potential investment growth.

Still, for workers facing immediate financial hardship, accessing retirement funds may sometimes be the only available option.

The latest data illustrates the balancing act many Americans face as they try to manage both current financial pressures and long-term retirement goals.