More Americans are cracking open their retirement piggy banks before retirement, and the trend is accelerating. Vanguard’s “How America Saves 2026” report, which analyzes 2025 data from its administered plans, found that 6% of 401(k) participants made hardship withdrawals last year, up from a range of 4.8% to 5% in 2024.

Before the pandemic, hardship withdrawals sat at roughly 2% of participants. The current figure is nearly triple that baseline, and it marks the sixth consecutive annual increase.

The numbers behind the squeeze

The median hardship withdrawal was $1,900. Housing costs rank among the top reasons participants cited for tapping their retirement funds. Specifically, covering mortgage or rent payments to stave off eviction or foreclosure drove many of these withdrawals.

Average 401(k) balances simultaneously hit a record high of approximately $168,000, climbing 13% year-over-year.

Why this keeps getting easier, and why that’s a problem

Regulatory changes since 2018 have progressively loosened the rules around accessing retirement funds early. The SECURE 2.0 Act, passed in late 2022, further streamlined the process for workers who need to pull money from their 401(k) plans.

Vanguard’s Jeff Clark warned that these withdrawals could jeopardize long-term retirement security. The damage is twofold. First, pulling money out means losing the compounded growth that makes retirement accounts powerful in the first place. Second, hardship withdrawals typically trigger taxes and penalties. If the participant is under 59 and a half, a 10% early withdrawal penalty often applies on top of income tax. Some SECURE 2.0 provisions waive certain penalties in specific circumstances, but the tax bill remains.

What this means for retirement savers

Vanguard’s report emphasizes the importance of maintaining separate emergency savings rather than treating retirement accounts as a financial backstop.

Some employers have started offering emergency savings accounts alongside 401(k) plans, a feature that SECURE 2.0 explicitly encourages. These sidecar accounts allow workers to build a small cash reserve within the same payroll deduction framework, potentially reducing the temptation to raid retirement savings for short-term needs.