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Americans are saving more for retirement than ever, but a growing number are also tapping into those savings to cover financial emergencies, according to Vanguard’s newly released How America Saves 2026 report.

The report found that 6% of participants in Vanguard-managed defined contribution retirement plans took a hardship withdrawal in 2025, up from 5% the previous year and roughly triple the rate seen before the pandemic. The increase marks the sixth consecutive year that hardship withdrawals have risen. 

The findings highlight a growing tension in household finances. While retirement account balances reached record levels thanks to strong market performance and higher participation rates, more workers are turning to their 401(k)s as a financial safety net when faced with unexpected expenses.

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Saving is essential

The rising incidence of hardship withdrawals highlights the importance of setting aside money for emergencies, Vanguard’s Jeff Clark, head of defined contribution research and the author of the report on savings, told CBS News.

According to Vanguard, the most common reasons for hardship withdrawals were avoiding foreclosure or eviction (36%), medical expenses (31%), tuition costs (13%), and home repairs (11%). The median withdrawal amount was $1,900. 

The increase comes despite otherwise positive retirement savings trends. Vanguard reported that average account balances climbed to nearly $168,000 in 2025, while the median balance rose to more than $44,000. Participation rates and overall contribution levels also remained strong, aided by automatic enrollment and other plan features designed to encourage long-term saving. 

Vanguard researchers say several factors are driving the increase in hardship withdrawals. Persistent inflation, rising borrowing costs, and higher living expenses have strained many household budgets. At the same time, regulatory changes and streamlined plan administration have made it easier for participants to access retirement funds during emergencies.

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Low-income workers are most affected

The company’s separate research on hardship withdrawals found that lower-income workers are significantly more likely to tap retirement savings. Participants earning less than $100,000 annually were about 3.5 times more likely to take a hardship withdrawal than higher-income workers, with most withdrawals used to avoid eviction or foreclosure or to cover medical expenses. 

Congress has also expanded access to retirement savings in recent years. Changes enacted through the Bipartisan Budget Act and the SECURE 2.0 Act eliminated some restrictions and created new penalty-free emergency withdrawal options, reducing barriers to accessing retirement funds.

While the record withdrawal rate raises concerns about long-term retirement security, Vanguard emphasizes that the broader retirement system remains healthy. The company notes that automatic enrollment has brought millions of additional workers into retirement plans, increasing both savings rates and the number of participants who have assets available when financial emergencies occur.

Vanguard argues that the trend underscores the need for emergency savings programs and other financial wellness initiatives that can help workers meet short-term financial needs without sacrificing retirement assets. Plans offering emergency savings accounts alongside retirement plans have shown significantly lower hardship withdrawal rates, according to the firm’s research.