Record number of Americans tap 401(k)s as market turmoil sparks 2008 crash fears

Many people in the United States had to take money from their retirement savings in 2025. Experts say this is a worrying sign because it shows many families are under money pressure. Data from Vanguard shows that 6% of workers with 401(k) retirement plans took hardship withdrawals in 2025. This is the highest level ever recorded. A hardship withdrawal means taking money early from a retirement account because of serious financial problems.

These withdrawals usually happen during emergencies. For example, people may face eviction from their homes, foreclosure, big medical bills, or losing their jobs. The 6% withdrawal rate in 2025 is much higher than the 4.8% seen in 2024, according to a report by the Daily Mail. Before the COVID-19 pandemic, only about 2% of people used their retirement savings in this way. This means the current level is about three times higher than before.

Millions using 401(k) savings

Experts estimate that 60–70 million Americans currently have active 401(k) accounts, so the 6% withdrawal rate could mean around 4.2 million people took money out last year. To show how big that number is, it’s roughly the same as every single resident of the U.S. state of Oregon withdrawing part of their retirement savings. Even though many people withdrew money, most withdrawals were relatively small, according to Vanguard.


The median amount taken out was about $1,900, meaning half of the withdrawals were below that amount. The most common reasons for these withdrawals were avoiding eviction or foreclosure and paying urgent medical bills. However, Vanguard says the increase may not only be due to worsening economic conditions. In 2018, Congress changed the rules for hardship withdrawals, making it easier for people to access their retirement money early.

Rules made withdrawals easier

Earlier, workers had to take a loan from their 401(k) first before making a hardship withdrawal, but that rule was removed, as noted by Daily Mail. Because of this change, it is now easier and faster for people to request hardship withdrawals from their retirement plans. Vanguard also said automatic enrollment programs are bringing more workers—especially lower-income workers—into retirement plans, which could naturally lead to more withdrawals. The company noted that for some workers facing financial stress, hardship withdrawals act as a safety net when they have no other options.

Despite the increase in withdrawals, overall retirement account balances still grew strongly thanks to good stock market performance. Vanguard said average 401(k) balances increased by about 13%, helped by strong investment returns. At the same time, financial markets have been volatile, which is making many investors nervous about their savings. Some people watching market swings fear a situation similar to the 2008 financial crisis, when retirement accounts lost large amounts of value.

Stock market boosts savings

However, short-term market swings don’t always reflect full-year investment results, experts say. Separate data from Fidelity Investments looked at nearly 25 million retirement accounts and found that balances still increased overall. According to Fidelity, the average 401(k) balance rose by 11% in 2025 to about $146,100. This happened even though the stock market was very unstable earlier in the year. It was also the third year in a row that workplace retirement accounts saw double-digit growth.

As the stock market boomed and workers continued to bundle up their savings, the increase happened as per Fidelity. The S&P soared 16.39% in 2025, making retirement accounts buff, Daily Mail reported. Nasdaq Composite also rallied, increasing 20 %, with most of it driven by tech giants. By the end of the year, the average retirement balance across all age groups was around $146,000. Among people who have been saving for at least 15 years, the median balance reached about $377,000, showing how long-term investing can build wealth.

At the very top end, 665,000 retirement accounts finished 2025 with more than $1 million, showing strong long-term growth for some investors. That number was higher than the 537,000 million-dollar accounts recorded in 2024, showing continued improvement in retirement savings for many Americans.


Overall, the data paints a mixed picture of the U.S. economy—some workers are under financial pressure and using retirement funds, while others continue to see their savings grow thanks to strong markets and consistent investing.

FAQs

Q1. Why are more Americans taking money from their 401(k) accounts?

More Americans are making hardship withdrawals from their 401(k) plans because of financial pressure like medical bills, risk of eviction, job loss, and easier withdrawal rules.

Q2. How much money are people usually withdrawing from their 401(k)?

Most hardship withdrawals are small, with the median amount around $1,900 according to data from Vanguard.