Retirement and Household Finances

Vanguard’s newly released 2026 report on Americans’ savings habits finds that 6% of participants in its 401(k) plans took IRS‑defined hardship withdrawals in 2025, a record share and up from 5% in 2024, underscoring how often workers are raiding retirement funds to cover emergencies. The firm says rising use of hardship withdrawals—most commonly to avoid foreclosure or eviction (36%) and pay medical bills (31%)—reflects ongoing financial strain even as average account balances climbed 13% to $168,000 on the back of stock‑market gains and auto‑enrollment features. A 2022 federal law has also expanded access by allowing penalty‑free withdrawals tied to domestic abuse, federally declared disasters, and one $1,000 emergency withdrawal every three years, effectively turning some retirement plans into de facto emergency‑savings accounts. The typical hardship withdrawal was $1,900 in 2025, but broader research from the National Institute on Retirement Security shows the median working‑age American has only about $1,000 saved for retirement at all, highlighting a deep divide between those with growing 401(k) balances and the majority with almost nothing. An AARP report cited in the piece notes that about 7% of retirees are returning to work for financial reasons, adding to signs that inadequate savings and rising living costs are pushing more Americans to tap long‑term retirement money just to stay afloat.