Data from Vanguard shows Americans are pulling money out of their retirement accounts early at record rates to help make ends meet.
Last year, 6% of Vanguard’s clients took a hardship withdrawal, which allows them to access funds in tax-advantaged retirement accounts, such as a 401(k), before they reach retirement age. That was up from 4.8% in 2024, the asset management giant said.
Taking a hardship withdrawal is not ideal for a few reasons, one of them being that investors are subject to a withdrawal penalty of 10% for taking money out of their account before 59½. On top of that, they are then taxed on any gains. However, perhaps most importantly, they rob themselves of future growth potential on that money, especially if they are still far from retirement age.
It’s not ideal, but keeping food on the table, a roof over your head, and light/heat running are going to be bigger priorities than worrying about a tomorrow that might not come, anyway.
Yeah, the real dystopian truth is that people who are able to pull from a retirement account as a stop-gap are in a much more fortunate position than countless peers who live paycheck-to-paycheck and haven’t been able to squirrel anything significant away.
This is exactly my mindset these days. I never managed to get ahead, hell i barely ever managed to catch up. I’ve been paranoid in the past about my inability to put aside any savings, but now i don’t even think it matters. In the end, the healthcare industry will ultimately take all of my money–there’s no way i can afford treatment for even minor problems, much less the big stuff that lies in wait for us when we get older. So why bother trying to create a savings–just to have them take it all away? So i can squeak a couple more years of life, penniless after having battled cancer? Fuck that.