By Suzanne Woolley and Sonali Basak
More Americans than average are turning to their retirement accounts for emergency cash in a trend that’s catching the attention of Empower, the nation’s second-largest retirement plan provider by plan participants.
Hardship withdrawals from 401(k)s are running about 15% to 20% above the historical norm, Empower CEO Ed Murphy said Monday in a Bloomberg TV interview. A withdrawal allows Americans to take money out of their retirement savings to cover an immediate and heavy expense such as medical or housing debt. However, any withdrawal is taxed and, for those under age 59 ½, can come with a 10% penalty.
“There is a corollary to what you are seeing in the US economy with deferred payments on auto loans and mortgages,” said Murphy, whose company administers 88,000 retirement plans for 19 million people. “That’s something we monitor carefully.”
A report from Vanguard Group earlier this year also found hardship withdrawals rising, with a record 4.8% of plan participants initiating a withdrawal, up from 3.6% in 2023.
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