Hardship withdrawals surge as people raid 401(k) accounts

More people are making hardship withdrawals from their 401(k) accounts, raiding retirement funds to cover emergency medical expenses, or to avoid losing a home.

Hardship withdrawals from Fidelity Investments 401(k) accounts have tripled in five years, according to a report from the investment firm, Daniel de Visé reports. The share of plan participants withdrawing funds rose from 2.1% in 2018 to 6.9% in 2023.

“It’s a big problem, and it’s a growing problem,” said Kirsten Hunter Peterson, vice president of thought leadership at Fidelity.

Vanguard reports that hardship withdrawals have doubled in a four-year span, from a monthly rate of 2.1 transactions per 1,000 participants in 2018 to 4.3 in 2022.

The nation's economy is on fire

The U.S. economy shifted into a higher gear in the third quarter as a surge in consumer spending offset a dip in business investment, the fastest pace since late 2021, when the nation was climbing out of the COVID-induced recession.

The nation’s gross domestic product, the value of all goods and services produced in the U.S., expanded at a seasonally adjusted annual rate of 4.9% in the July-September period, the Commerce Department said Wednesday.

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