Your Retirement Nest Egg Is Quietly Becoming America’s Emergency Piggy Bank

More Americans are dipping into tomorrow’s savings to pay today’s bills. According to Vanguard Group, a record 6% of 401(k) participants took hardship withdrawals in 2025 as financial shocks outpaced emergency savings — more than triple the pre-pandemic rate of about 2%. The median withdrawal clocked in at $1.9K, with housing emergencies driving 36% of requests, followed by medical bills at 31%.

• The rise in hardship withdrawals partly reflects auto-enrollment, which pulls lower-income workers into plans, leaving many still better off than if they had never saved.
• Average 401(k) balances rose 13% year-over-year to $168K in 2025 as markets rallied and 45% of savers increased contributions, per Vanguard Group.

The saving paradox: Experts worry more about restrictions deterring participation than about current withdrawal rates, as retirement money locked away from everyday spending acts as a “commitment device” that workers value. The real alarm bell would be hardship withdrawals surpassing 401(k) loans — something that isn’t close to happening yet, suggesting Americans aren’t raiding their accounts like ATMs despite the headlines. Still, with the median working-age American having saved just $1K for retirement, the margin for error is shrinking.