COLUMBUS, Wis., March 04, 2026 (GLOBE NEWSWIRE) — A record number of Americans are turning to their 401(k) retirement accounts to cover everyday expenses and emergencies, underscoring mounting financial pressure on U.S. households. This warns of Long-Term Retirement Impact as Emergency Taps Reach Historic High
According to recent data from major plan administrators including Vanguard and Fidelity Investments, 6% of 401(k) participants took hardship withdrawals in 2025, up sharply from 4.8% in 2024 and 3.6% in 2023 (both previous records) and 2.8% in 2022, and nearly double the pre-pandemic average of approximately 2%.
Nearly 40% of workers surveyed reported taking a loan, early withdrawal, or hardship distribution from their retirement account, according to reporting by Yahoo Finance. Meanwhile, the Wall Street Journal notes that overall contribution rates remain near historic highs — revealing a growing trend: Americans are increasingly using 401(k)s as both retirement vehicles and emergency safety nets.
“This is a flashing red light for the American economy,” said Michael Eisenga, CEO of First American Properties. “When nearly 5% of participants are tapping retirement accounts in a single year, that’s not discretionary spending — that’s financial distress.”
Rising Hardship, Shrinking Cushion
The top reasons cited for hardship withdrawals include personal debt (24%), recurring bills (21%), unexpected major expenses (19%), and medical costs (18%). Credit card balances nationally have surpassed $1 trillion, and delinquency rates are rising, particularly among lower-income households.
Lower-income and hourly workers are disproportionately represented among those taking early withdrawals, exacerbating long-term wealth inequality. Industry research from the Employee Benefit Research Institute describes this phenomenon as 401(k) “leakage” — the erosion of retirement assets due to early distributions and cash-outs during job transitions.
Roughly one-third to more than 40% of workers changing jobs choose to liquidate their 401(k) balances rather than roll them over, compounding long-term losses.
“Early withdrawals don’t just reduce a balance today — they eliminate decades of compound growth,” Eisenga said. “In many cases, workers could see retirement balances reduced by 20% to 30% over time because of one period of financial strain.”
Policy Changes Increase Access — and Usage
The SECURE 2.0 Act, enacted in 2022, expanded access to retirement funds by allowing penalty-free emergency withdrawals of up to $1,000 annually beginning in 2024, along with other hardship provisions. While designed to provide flexibility, the law may also be contributing to increased withdrawal activity.
At the same time, national 401(k) assets remain above $7 trillion, and average employee deferral rates are near record levels. That dual trend — strong contributions alongside record withdrawals — highlights the growing role of retirement accounts as financial shock absorbers.
“The 401(k) was never meant to function as an emergency savings account,” Eisenga added. “But for millions of Americans, it’s become the only accessible source of liquidity when unexpected costs hit.”
Implications for Retirement Security
Financial experts warn that sustained leakage threatens long-term retirement readiness, particularly among middle- and lower-income workers who lack separate emergency savings buffers.
Without broader structural solutions — including employer-linked emergency savings accounts, automatic portability when changing jobs, and improved financial literacy — the trend may continue.
“As business leaders, policymakers, and employers, we need to recognize what this data is telling us,” Eisenga said. “Americans are working, they’re contributing to retirement, but too many are living without a financial cushion. That gap is putting future retirement security at risk.”
First American Properties encourages employers and policymakers to explore expanded emergency savings solutions that protect both present stability and long-term financial health.
About First American Properties
First American Properties is a privately held investment and real estate management firm headquartered in Columbus, Wisconsin. The firm specializes in strategic asset acquisition, development, and portfolio management across diverse sectors of the U.S. economy.
Disclaimer: This press release is for informational purposes only and does not constitute investment advice. Forward-looking statements are subject to risks and uncertainties.
Media Contact:
First American Properties
Michael Eisenga, CEO
meisenga@firstamericanusa.com
(920) 350-5754
