401(k) balances just hit a record. So did the number of people raiding them.
The average Vanguard account ended last year at $168,000. Even so, more savers than ever pulled money out early to cover an emergency.
A hardship withdrawal lets you pull money from your 401(k) early for an urgent cost. Think a medical bill or a missed mortgage payment.
In 2025, 6% of Vanguard savers did it. That is up from 5% the year before, and about triple the rate in 2020.
Here is the part that caught researchers off guard. The feature that built bigger balances is now feeding the emergencies.
More bosses sign workers up on their own now. So even lower earners hold money in a retirement account they can reach in a pinch.
Vanguard runs these plans for nearly five million workers. Higher housing, health, and school costs are pushing more of them to dip in.
Jeff Clark, who runs savings research at Vanguard, said auto-enrollment is handing people a safety net they never set up. That same trend nudged 45% of savers to set aside more last year.
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Most of these withdrawals are small. The typical one was $1,900 last year.
About a third went to stop a foreclosure or eviction. Another third covered medical costs.
The rest paid for basics, with 13% going to tuition and 11% to home repairs. Only about 5% went toward buying a home.
Pulling money early is rarely free. Savers under age 59 and a half usually pay a 10% penalty on top of income taxes.
It is rarely a one-time thing, either. About half of the people who tapped their accounts last year did it more than once.
On top of that, 21% went back three or more times in a single year.
Some of that is by design. A 2022 law lets workers take out up to $1,000 every three years without the penalty.
That same law also waived the penalty for victims of domestic abuse and federal disasters.
The deeper issue is how little backup most people have. The median working-age American holds about $1,000 in retirement savings.
When that is all there is, a $1,900 car repair and a retirement account start to look the same.
The squeeze is showing up elsewhere too. About 7% of retirees are now heading back to work to cover the bills.
That is the same money crunch, just showing up later in life.
Watch whether balances keep climbing while withdrawals climb right alongside them.
The accounts meant for age 70 are quietly doing the work of a rainy-day fund at 40.
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