Overview
- Vanguard reports about 6% of participants took hardship withdrawals in the most recent year, up from roughly 1.7% in 2020, with a median withdrawal of $1,900.
- The most cited needs include preventing eviction or foreclosure, paying medical bills, and covering tuition expenses.
- Since 2024, many savers can pull up to $1,000 once a year for an urgent expense they define, though standard early withdrawals before age 59½ generally face a 10% IRS penalty and income tax unless exceptions apply.
- Auto‑enrollment has expanded to 61% of Vanguard plans from 54% in 2020, highlighting stronger participation even as rising withdrawals expose household cash‑flow strain.
- Plans often allow 401(k) loans up to half the vested balance or $50,000, typically repaid within five years with no immediate tax or penalty, but advisors urge using retirement funds only as a last resort and building 3–6 months of emergency savings.