401(k) 'hardship' withdrawals hit record high, Vanguard says

12.9.22 - 401(k) 'hardship' withdrawals hit record high

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401(k) 'hardship' withdrawals hit record high, Vanguard says - another sign households feel the pinch of inflation - CNBC

The share of retirement savers who withdrew money from a 401(k) plan to cover a financial hardship hit a record high in October, according to data from Vanguard Group.

That dynamic - when coupled with other factors like fast-rising credit card balances and a declining personal savings rate - suggests households are having a tougher time making ends meet amid persistently high inflation and need ready cash, according to financial experts.

Nearly 0.5% of workers participating in a 401(k) plan took a new "hardship distribution" in October, according to Vanguard, which tracks 5 million savers. That's the largest share since Vanguard began tracking the data in 2004.

Put another way, roughly 25,000 workers took one of these distributions, which allow workers to tap their 401(k) plans before retirement for an "immediate and heavy" financial need.

Meanwhile, savers have been dipping into their nest eggs via other means - loans and "nonhardship" distributions - in higher numbers throughout 2022, according to Vanguard data.