401(k) Balances Reach New Highs, But Hardship Withdrawals Also Rise

Retirement savings grow, but financial struggles lead to increased early withdrawals

Apr. 3, 2026 at 11:05am

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An extreme close-up of various gears, levers, and metal components of a complex banking or financial machine, conveying the intricate workings of the modern financial system.As 401(k) balances reach new highs, the rise in hardship withdrawals underscores the financial struggles many Americans face.Brookings Today

Despite strong growth in average 401(k) balances and the number of 401(k) millionaires, there has also been a significant increase in the number of hardship withdrawals from these retirement accounts. While automatic enrollment has helped boost participation, it has also led some workers who may not want to invest to take early withdrawals to cover basic expenses.

Why it matters

The rise in 401(k) balances is a positive sign that more Americans are saving for retirement, but the increase in hardship withdrawals highlights the financial struggles many are facing. This trend raises concerns about workers' long-term financial security and the potential impact on their retirement readiness.

The details

Data from leading financial firms like Vanguard and Fidelity shows that average 401(k) balances grew by over 11% in 2025, reaching nearly $168,000. The number of 401(k) millionaires also increased to 665,000. However, the Vanguard How America Saves 2026 report found that 6% of 401(k) participants made a hardship withdrawal in 2025, up from 5% the previous year. This is a significant increase from the pre-pandemic rate of around 2%. The SECURE 2.0 Act, which allows workers to take out $1,000 without penalty for approved emergencies, has contributed to this trend.

  • In 2025, the average 401(k) participant balance reached nearly $168,000.
  • In Q4 2025, 401(k) balances under Fidelity's management increased by more than 11%.
  • As of the end of 2025, there were 665,000 people with more than $1 million in their 401(k)s, up from 654,000 in the third quarter of the previous year.
  • In 2025, 6% of 401(k) participants made a hardship withdrawal, up from 5% the previous year.
  • Before the pandemic, the hardship withdrawal rate was around 2%.

The players

Vanguard

A leading financial firm that reported on the increase in 401(k) balances and hardship withdrawals.

Fidelity

Another leading financial firm that reported on the growth in 401(k) balances and the number of 401(k) millionaires.

Empower

A financial firm that provided research on the average 401(k) balances for workers in their 50s and 60s.

Brookings Institution

A research organization that found a third of middle-class families are unable to afford basic necessities, leading them to make hardship withdrawals.

SECURE 2.0 Act

Legislation that allows workers to take out $1,000 from their 401(k) without penalty for approved emergencies, contributing to the increase in hardship withdrawals.

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What’s next

As policymakers and financial institutions continue to monitor the trends in 401(k) balances and hardship withdrawals, they may consider further adjustments to retirement savings policies and programs to help workers build long-term financial security while also addressing immediate financial needs.

The takeaway

The growth in 401(k) balances is a positive sign, but the rise in hardship withdrawals highlights the financial struggles many Americans are facing. Employers and policymakers will need to find ways to support workers' short-term needs while also encouraging long-term retirement savings to ensure financial stability for the future.