A record 4.8% of Americans took hardship withdrawals from their 401(k)s in 2024, up from 3.6% in 2023, signaling growing financial strain, according to Vanguard.

The most common reasons were preventing foreclosure and covering medical bills.

The rise is partly due to expanded automatic enrollment in retirement plans and relaxed withdrawal rules.

While hardship withdrawals offer emergency relief, they come with penalties and permanently reduce retirement savings, The Hill has reported.

Despite financial stress, Vanguard reported a 10% increase in average account balances to $148,200, driven by a strong stock market and higher savings rates.

Written by B.C. Begley